By Hideyuki Sano
TOKYO (Reuters) - The British pound paused for breath on Friday after the UK parliament voted overwhelmingly to seek a delay in Britain's exit from the European Union while the yen looked to the Bank of Japan's guidance on its policy later in the day.
Sterling fetched $1.3253, having slipped further from Wednesday's nine-month high of $1.3380, with its fall of 0.76 percent on Thursday.
Against the euro, the pound retreated to 85.25 pence from Wednesday's 22-month peak at 84.725.
British lawmakers approved a motion setting out the option to ask the EU for a short delay if parliament can agree on a Brexit deal by March 20, or a longer delay if no deal can be agreed in time.
The pound was mostly steady after the motion was passed late on Thursday.
"There has been a soft consensus in the market that the Brexit will be delayed. Things have been moving in line with that," said Kyosuke Suzuki, director of forex at Societe Generale (PA:SOGN).
"But tail risk has not completely disappeared yet. The next week's EU summit will probably be the climax," he said, noting the fact that all 27 EU members must approve any extension.
Before UK Prime Minister Theresa May meets EU leaders on Wednesday and Thursday, a new vote on her twice-rejected deal is likely next week.
Lawmakers must now decide whether to back a deal they feel does not offer a clean break from the EU, or reject it and accept that Brexit could be watered down or even thwarted by a long delay.
The yen slipped to a one-week low of 111.83 per dollar on Thursday partly on speculation that the BOJ could make a stronger show of its readiness to ease policy further at its review ending later on Friday.
Still, most market players expect the BOJ to refrain from any drastic changes to its policy framework. The yen last stood at 111.77.
The euro eased to $1.1307 from Wednesday's one-week high of $1.1339, in tandem with sterling.
The Australian dollar traded at $0.7064, off this week's high of $0.7098 as its recent rebound was dented by reports that a possible summit meeting the United States and China to hammer out a trade deal will be delayed.
U.S. Treasury Secretary Steven Mnuchin said on Thursday that a trade summit between President Donald Trump and his Chinese counterpart Xi Jinping would not happen at the end of March as had been previously suggested because there was still more work to do in trade negotiations.
Trump said whether a trade deal can be reached with China would probably be known in the next three or four weeks.
U.S. data on Thursday underscored growing pressure on the U.S. economy and kept the dollar in check.
The number of Americans filing applications for unemployment benefits increased more than expected last week while new home sales fell more than expected in January.