* Yen slips amid Japan monetary easing expectations
* Pound weakened by surprise drop in industrial output
* Aussie, kiwi dlrs hit multi-week highs on China data
(Recasts, updates prices, adds comment)
NEW YORK, March 10 (Reuters) - The yen fell against most major currencies on Wednesday on bets the Bank of Japan will apply further monetary policy easing measures, while sterling slid on weak British industrial production.
The yen has benefited from repatriation flows as Japanese corporates looked to bring offshore earnings back home for their fiscal year-end. But a Reuters story that Japan's central bank may ease policy as early as next week pushed the yen to lows against the dollar and the euro.
The pound, already under pressure, dipped after an unexpected drop in British industrial production data for January.
"In an environment where there is not a definite theme, the Bank of Japan looms large," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto. "Once again the market has turned very bearish on sterling and investors are quick to pounce on any negative news from the UK."
The BOJ is leaning towards easing monetary policy again next week, sources said, but there is disagreement among policymakers on its board on how to justify such a move.
Midway through the New York trading day, the dollar was up 0.7 percent versus the yen at 90.61 yen after climbing as high as 90.82, according to Reuters data in New York.
The yen was down 1.2 percent against the Canadian dollar, 1.3 percent against the Swiss franc, 1.3 percent against the euro and 0.7 percent against the pound.
Japanese machinery data released Wednesday had added to easing expectations.
"Japanese machinery orders were weak and underpinned the likelihood that the BoJ will act further at the March 16 BoJ policy meeting to stimulate the economy." said FOREX.com analysts in a note.
STERLING
Sterling was down 0.1 percent at $1.4986, after falling to its lowest since March 2.
Sterling maintained its downtrend after falling on Tuesday on weak economic data, worries about Britain's creditworthiness, and political uncertainty. The weak industrial data only added to the gloom.
But commodity-linked currencies rose after Chinese data on Wednesday showed China's exports and imports surged past expectations in February, underscoring the momentum in the world's third-largest economy.
The Australian dollar rose to a seven-week high against the U.S. dollar, according to Reuters data and last traded at 0.9186, up 0.6 percent.
"They (Australian and New Zealand dollars) are benefiting from good Chinese data which suggest that the economy there is expanding strongly." Commerzbank analysts said in a note.
The New Zealand dollar rose to a five-week high. It last traded at 0.7087, up 0.9 percent. New Zealand's central bank is expected to keep interest rates unchanged when it announces its policy decision later in the day.
The euro rose 0.5 percent to $1.3672 after hitting a session low of $1.3546 and a peak of $1.3679.
Trading in the euro was volatile with the single currency swinging between gains and losses against the dollar. The euro rallied more than 1 percent against the yen but that was more on yen weakness.
"We are stuck in this range," said John Doyle, foreign exchange strategist at Tempus Consulting in Washington of the euro/dollar move. "There is nothing new today to explain" the euro's activity.
The single currency was hurt on Tuesday after Fitch Ratings said it still had a negative outlook on Portugal's credit rating.
That fed concerns that peripheral euro zone economies may face debt problems similar to those of Greece, where a fiscal crisis has led investors to flee the euro in past weeks. (Additional reporting by Neal Armstrong in London) (Reporting by Nick Olivari; Editing by Andrew Hay)