The yen eased against the dollar and euro on Wednesday, taking a breather from a short-covering rally that pushed the Japanese currency to two-week highs earlier this week. The yen had rallied after solid Japanese capital spending data on Monday prompted traders to trim huge yen short positions that had piled up since late last month when Japan's consumer price data for July came in below expectations. But its rally fizzled this session as such yen-buying subsided and as Japanese investors snatched up dollars and euros, attracted by their higher yields, traders said. "I think Japanese customers, probably mainly individuals, are stepping in to buy dollars at levels near 116 yen and also at levels above 115 yen because of interest rate differentials," said a dealer for a Japanese bank. Other traders said the yen was hurt due to dollar buying by Japanese institutional investors and importers. The dollar stood at 116.35 yen as of 0540 GMT, up from around 116.10 yen in late U.S. trading on Tuesday, and off a two-week low of 115.57 yen hit on electronic trading platform EBS on Tuesday. The euro edged up to 149.10 yen compared with around 148.80 yen in late U.S. trading, and off Tuesday's two-week low of 148.25 yen on EBS. Against the dollar, the euro was little changed at $1.2812 . The yen got a a very small lift to around 116 yen from around 116.06 yen earlier in the session on news that Japan's Princess Kiko had given birth to a baby boy, the first male heir born into the royal family in more than four decades.