* Yen off last week's lows as BOJ Kuroda dismisses additional stimulus
* Dollar index edges up but still near 3-week low
* Aussie dollar hits fresh 2014 highs vs USD
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, April 9 (Reuters) - The dollar retook a bit of the ground it lost in the previous session but still languished near a three-week low against a basket of major currencies on Wednesday, having broken decisively lower as the yen squeezed higher and the euro gained a tailwind.
Traders said the yen's sharp ascent was sparked in part by comments from the Bank of Japan's governor on Tuesday that dismissed any need for additional stimulus. Recent remarks from European Central Bank officials similarly suggested no urgency for any immediate policy action, underpinning the common currency.
BOJ Governor Haruhiko Kuroda said on Tuesday that there was no need for additional stimulus to pull Japan out of deflation, and expressed confidence the world's third-largest economy can ride out the impact of this month's increase to the national sales tax.
The dollar skidded more than 1 percent against the yen on Tuesday in its biggest one-day fall in over seven months to 101.55, its lowest since March 19.
It drifted back up to 102.01 yen, up about 0.2 percent on the day, but well shy of Friday's 2-1/2-month high of 104.13 yen. The euro also added about 0.2 percent, to 140.68 yen .
Many Japanese traders who had not been expecting any central bank action this month were surprised that overseas market participants apparently took Kuroda's words as a fresh cue to buy back yen.
"To be honest, there were quite a few people shaking their heads, not understanding this whole move overnight, but the explanation seems to be BOJ disappointment," said Bart Wakabayashi, head of forex at State Street in Tokyo.
"I don't think there were any expectations they (the BOJ) would do anything, and even if there were, it would have been pre-April, so now that we're through the tax hike and they haven't done anything, I don't see a reason for them to do anything now without any hard evidence of a slowdown," he said.
Kuroda's remarks caught the market long of U.S. dollars and very short of yen, which helped knock the dollar index to a low of 79.709 on Tuesday. It was last slightly higher on the day at 79.792.
The euro climbed as far as $1.3812 on Tuesday, pulling further away from Friday's trough of $1.3672, and was last steady on the day at $1.3792.
The Australian dollar was up 0.1 percent against the greenback at $0.9367, after breaking through tough resistance at $0.9310 to reach $0.9385 on Wednesday, a high not seen since Nov. 20.
Analysts at BNP Paribas said that the dollar was not down for the count, and that it could make a solid 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." (Editing by Chris Gallagher)