The Japanese yen lost ground against the US dollar on Wednesday, as risk appetite improves, hitting the demand for yen as a safe haven currency.

USD/JPY hit a day high of 84.26 during early European trade, before consolidating at 84.07, up 0.60 percent. EUR/JPY gained 0.81 percent to hit 121.96.

Earlier on Wednesday, the greenback traded at 83.60 yen, near a session low of 83.44 yen, after Japan raised the severity level at its crippled nuclear power plant.

The USD/JPY is likely to find support at day’s low of 83.44 and resistance at 85.54, a seven-month high hit on last Thursday. Traders said that yen has also been pressurized by short-covering and profit booking.

The yen rebounded sharply against the dollar and euro on Monday, after another major earthquake hit the northeast of Japan, the third in just a month.

The yen weakened broadly in recent weeks after G-7 nations intervened in the currency markets to weaken its surge against its major counterparts in the wake of major earthquake hitting the country last month.

Analysts’ said that global interest rate outlook to put pressure on yen, as the Bank of Japan (BoJ) is likely to maintain loose monetary policy to help the economy recover from the earthquakes. The BoJ kept rates unchanged at 0.1 percent during its meeting last week.

The Japanese cabinet office on Wednesday said that the nation's economy has shown some weakness after a devastating earthquake hit the country on March 11.