TOKYO, Japan - The dollar stayed within a narrow range Wednesday in Asia, slowing the recent appreciation of the yen thanks to bright economic data that eased worries over the US outlook.

The dollar stood at 85.39 yen in Tokyo morning trade, slightly down from 85.47 yen in New York Tuesday.

The euro was at 1.2848 dollars, down from 1.2881 in New York. The single currency fetched 109.64 yen, off an earlier 110.10.

Investors' risk appetite improved following data showing a rebound in US industrial production in July while building of new homes edged up, analysts said.

In addition, US wholesale prices rose in July for the first time in four months, easing immediate deflation fears in the world's largest economy.

Many players however were still cautious and taking a wait-and-see approach as the Japanese government mulls plans to deal with the rising yen and reinvigorate its economy, they said.

"While stressed markets might have welcomed a bit of risk-seeking, Japanese officials are likely dancing and holding inter-office ticker-tape parades," said strategists at RBC Capital Markets in a note.

"At last, a respite from the relentless focus on yen strength" and the question as to "'will they or won't they' intervene. They have some, likely only some, time to formulate a deflation-fighting plan, or a plan to offset yen strength."

Japan has not intervened in currency markets since 2004 but government leaders have recently voiced concerns over the strength of the yen, in a "verbal intervention" aimed at taming the currency's recent rise.

Prime Minister Naoto Kan is expected to offer a broad outline of additional stimulus measures as early as September in a bid to safeguard a recovery threatened by a strong yen.

He is set to meet with Bank of Japan governor Masaaki Shirakawa next week.

A rebound of Japanese shares also helped buoy the dollar, although the greenback's upside was capped by persisting worries over the US economy, said Yuzo Sakai, senior dealer at Tokyo Forex & Ueda Harlow.

"There still is a strong sense that the dollar will weaken in the future," he said. Dow Jones Newswires contributed to this report