TOKYO: The yen strengthened in Asia on Monday as the Bank of Japan (BoJ) began a two-day meeting widely expected to see it launch further easing aimed at boosting the world's third-largest economy.
The dollar was initially stronger against the Japanese currency in early trade, but slipped to 89.76 yen, compared with its 90.08 yen finish in New York on Friday.
The euro also lost early gains to sit at 119.56 yen from 119.96 yen in US trade, while it firmed to $1.3321 from $1.3317.
The yen tends to weaken on expectations of BoJ policy measures and has fallen sharply in recent weeks.
But another expansion of the bank's 101 trillion yen asset-buying programme may disappoint, analysts said, with National Australia Bank warning that another 10 trillion yen boost to its main policy tool "will underwhelm and probably send the (yen) higher".
Markets also expect the BoJ to fall in line with demands from Japan's new government, led by the hawkish Shinzo Abe, to adopt a two-percent inflation target designed to tackle the deflation that has haunted the economy for years.
"The market will be disappointed if the outcome is just an expansion of 10 trillion yen in the asset purchase programme with the introduction of a 2.0 percent inflation target," said a currency manager at a major Japanese bank.
The bank's meeting ends Tuesday, with any additional easing marking the first time in more than nine years that the BoJ has expanded monetary policy at two consecutive policy meetings, according to Dow Jones Newswires.
The dollar got some support after US Republicans proposed a three-month increase to the US debt ceiling to give more time to agree a budget, although it made the move conditional on steep spending cuts.
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