European shares steady after recent rally

The yen and sterling slipped against the dollar on Tuesday as expectations of fresh central bank efforts to kick-start the Japanese and British economies prompted fresh selling.

Both currencies have come under pressure in recent months due to the prospect of aggressive easing from a new leadership team at the Bank of Japan, and more bond buying to combat Britain's economic weakness from the Bank of England.

The yen carved out a fresh 3-1/2-year low versus the dollar of 96.71 yen after reports new BOJ governor Haruhiko Kuroda may take easing steps swiftly after he takes office next week rather than wait for the bank's April 2-3 meeting.

"We have this theme of a better dollar that is being recognised across the board. Overnight there were comments from Japan which again sounded dovish....what's different this week is the stronger dollar tone as well as the (weaker) yen tone," said Jane Foley, senior FX strategist at Rabobank.

The pound has been one of the worst performing major currencies in 2013, falling 8.4% against the dollar and 7.6% against the euro.

That downtrend remained in focus in early European trading as it dropped 0.2% to $1.4890 at 0830 GMT, to leave it just above Monday's 2-1/2 year intra-day low of 1.4866.

European shares, meanwhile, saw a soft start to the day with little direction following last week's sharp move higher. The euro also fell back below $1.30.

London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX all opened down 0.1%, pushing the pan-European FTSEurofirst 300, which ended last week at a 4-1/2 year high, down by the same amount.

Assets typically linked with risk aversion were firmer.

German Bund futures were up three ticks at 142.76. Italian bonds, which are in the spotlight after Fitch cut the country's credit rating on Friday, fell for the second day running.