By Kevin Buckland

TOKYO (Reuters) - The dollar nursed its wounds on Wednesday following big tumbles against the euro and sterling, hurt by a combination of surprisingly robust European activity data and cooling U.S. business growth.

However the yen remained mired near a 34-year low versus the U.S. currency, even as Japanese officials stepped up intervention warnings.

The dollar index - which measures the currency against six major peers including the euro, sterling and yen - was flat at 105.64 in early Asian trading after slumping 0.4% overnight and touching the lowest level since April 12 at 105.23.

The euro was little changed at $1.069975 following Tuesday's 0.45% rally, after data showed business activity in the euro zone expanded at its fastest pace in nearly a year, primarily due to a recovery in services.

Sterling also benefited from overnight data showing British businesses recorded their fastest growth in activity in nearly a year, while Bank of England Chief Economist Huw Pill said interest rate cuts remained some way off. Sterling was last steady at $1.24485 having jumped 0.79% in the previous session.

By contrast, U.S. business activity cooled in April to a four-month low due to weaker demand, while rates of inflation eased slightly, suggesting some possible relief for the Federal Reserve.

A major test of that will come Friday with the release of the Fed's preferred consumer inflation measure, the PCE deflator. Markets currently price in a 73% chance of a first rate cut by September, according to the CME's FedWatch tool.

Elsewhere, the Australia's dollar hovered at the highest since April 15 at $0.64875 ahead of consumer inflation figures, after rebounding more than 1% over the past two days following its dip to a five-month low on Friday.

The dollar index reached a 5-1/2-month peak at 106.51 last week as persistent inflation forced Fed officials to signal no rush to ease policy.

Despite the dollar's broader struggles on Tuesday, it still inched up enough at one point to mark a fresh 34-year high to the yen at 154.88. This week, the pair has oscillated in an extremely narrow range between that high and a low of 154.50, with traders wary that a push above 155 could raise the risk of dollar-selling intervention by Japanese officials.

Japanese Finance Minister Shunichi Suzuki on Tuesday issued the strongest warning to date on the chance of intervention, saying last week's meeting with U.S. and South Korean counterparts had laid the groundwork for Tokyo to act against excessive yen moves.

The Bank of Japan is widely expected to leave policy settings and bond purchase amounts unchanged at the conclusion of a two-day meeting on Friday, having just raised interest rates for the first time since 2007 just last month.

And while Japan's central bank is likely to signal a readiness to tighten policy again this year, its ultra-cautious, data-dependent approach has limited any strengthening in the yen.

"Aside from the financial cost, there could be a significant impact on the credibility of the Japanese authorities if FX intervention fails," Rabobank strategist Jane Foley wrote in a client note.
 

"Historically, FX intervention is most successful if the fundamentals are coincidentally turning in favour of that currency," she said. "USD/JPY may not turn lower until the summer, and this assumes that the Fed can cut rates in September."