The euro cut losses against the dollar on Wednesday after a German government bond auction attracted solid demand, while sterling rose after Bank of England minutes were less dovish than expected.

The dollar came under fresh selling pressure against the yen, easing toward recent 15-year lows on growing speculation that Japanese authorities are unlikely to intervene to counter their currency's recent strong run.

The euro recovered from the day's low after a 5 billion euro sale of German 10-year debt produced a record-low average yield of 2.37 percent. An auction of Portuguese T-bills also went smoothly.

Analysts said that in the absence of big events or economic data in the euro zone, investors had taken the successful auctions as a cue to pick up the single currency.

Whenever we see strong euro zone debt auction results, the euro will get a tailwind, said John Hydeskov, senior currency analyst at Danske in Copenhagen.

By 1126 GMT, the euro was flat on the day against the dollar at $1.2875, pulling away from the day's low around $1.2825.

The euro was supported at around $1.2845, the 50 percent retracement of the single currency's fall from its March 17 high of $1.3817 to its four-year low of $1.1876 struck on June 7.

The euro has recovered from this week's low of $1.2732 on robust responses to Irish and Spanish debt auctions, although investors remain cautious about going long on the single currency due to worries about peripheral euro zone economies.

Sovereign debt jitters refuse to die down, said Neil Mellor, currency strategist at Bank of New York Mellon. Spreads for Greek, Italian and Portuguese debt remain elevated, despite the good responses to Irish and Spanish debt auctions this week. So we should see that impacting the euro.

The 10-year Greek/German government bond yield spread remained high at 853 basis points. The equivalent spread on Portuguese bonds was flat at 284 basis points.

STERLING CLIMBS

The pound traded 0.3 percent higher at $1.5640. It hit the day's high after minutes from the BoE's policy meeting earlier this month showed an 8-1 vote to hold interest rates at a record low 0.5 percent.

One policymaker voted in favor of a rate rise.

Sterling recovered from a three-week low hit earlier in the day on talk the BoE minutes could reveal a three-way split decision, which would have meant one member voting for an increase in the central bank's quantitative easing program.

Traders reported option-related offers at $1.5660/90, which were seen capping the pound's gains.

The dollar shed 0.3 percent against the yen to 85.28 yen, not far from a 15-year low of 84.72 yen hit on trading platform EBS last week. Traders cited stops at 85.20 yen which could check the dollar's fall.

Dollar/yen is headed toward the 85 yen level and there is little that can be done to prevent that, said Kenneth Broux, markets strategist at Lloyds TSB Financial Markets.

Japanese authorities seem unlikely to conduct yen-selling intervention unless the currency's rise accelerates sharply, market players say. Speculation about intervention has mounted ahead of a meeting between Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa expected next Monday.

The Canadian dollar was higher against the greenback at C$1.0299 having surged on Tuesday after BHP Billiton (BLT.L) (BHP.AX) launched an unsolicited $38.6 billion bid for Canada's Potash Corp.

(Additional reporting by Anirban Nag; editing by Stephen Nisbet)