* Yen squeezes broadly higher after BOJ dismisses additional stimulus
* Dollar index falls to lowest in three weeks
* Aussie dollar hits fresh 2014 highs vs USD
By Ian Chua
SYDNEY, April 9 (Reuters) - The dollar languished at three-week lows against a basket of major currencies on Wednesday, having broken decisively lower as the yen squeezed higher and even the euro gained a tailwind.
Traders said the moves were sparked in part by comments from the Bank of Japan on Tuesday that dismissed any need for additional stimulus. Recent remarks from European Central Bank officials have also suggested no urgency for any immediate policy action.
All that caught the market long of U.S. dollars and very short of yen, knocking the dollar index down 0.6 percent to a low of 79.762.
The dollar skidded more than 1 percent against the yen in its biggest one-day fall in over seven months to 101.55. It has since drifted back up to 101.91.
The euro climbed as far as $1.3812, pulling further away from Friday's trough of $1.3672. Even the Australian dollar broke through tough resistance at $0.9310 to reach $0.9368, a high not seen since November.
The dollar also slid on a raft of emerging market currencies where investors have been wagering massively on dollar strength that has not materialised, forcing a bailout of long positions.
In contrast, the Japanese currency gained ground on the euro, the Australian dollar and many other currencies as well as investors rushed to cover bearish positions.
Bank of Japan Governor Haruhiko Kuroda said on Tuesday there was no need for additional stimulus to escape years of debilitating deflation. He also expressed confidence the world's third-largest economy can ride out the impact of a sales tax rise.
Dollar bulls will be left to rue the greenback's latest setback given an absence of any major economic data out of Asia.
However, analysts at BNP Paribas believe the greenback could still make a comeback soon.
"We expect the USD to regain its feet in the weeks ahead as improving U.S. data puts renewed upside pressure on U.S. yields," they wrote in a note to clients.
"We closed our USD/JPY long recommendation flat on Tuesday as the pair fell through our trailing stop set at our entry level. However, we think the pair is likely to hold above the year's lows around 100.80 and expect the March lows around 101.20 to also provide good support."
On Thursday, Australia's employment report and China's trade numbers will take centre stage in the local session. (Editing by Richard Pullin)