Dollar slips versus yen before BOJ rate meet

TOKYO, Dec 18 (Reuters) The dollar slipped a touch against the yen early on Monday as investors awaited a Bank of Japan policy meeting and comments from BOJ Governor Toshihiko Fukui to see whether he signals that Japanese rates will next month.

The dollar lost some steam after gaining against major currencies last week, when a mixed bag of economic data cut back some market expectations that the Federal Reserve may start lowering interest rates early next year.

Analysts said that short-covering in the dollar could take a back seat in the next few sessions and that the yen could inch up slightly as dealers focus on Fukui's comments, which will follow a two-day BOJ rate meeting that begins later in the session.

''If Fukui suggests that the BOJ could raise rates in January, we could see the yen gain, as not everyone in the market is expecting a lift next month,'' said Toru Umemoto, chief forex strategist at Barclays Capital in Tokyo.

The BOJ is widely expected to keep rates unchanged at 0.25 percent when it announces its rate decision on Tuesday.

The dollar traded at 118 yen early in the Tokyo session, down a touch from 118.18 yen late on Friday.

The US currency has risen roughly 3 percent against the yen this month, in part after expectations of a BOJ rate rise this month were dashed by a string of weak Japanese economic data.

The optimistic view of the economy expressed by big Japanese manufacturers in the BOJ's quarterly tankan poll on Friday did little to change the market's view that the central bank will forgo a rate lift on Tuesday.

The euro was at $1.3080 against the US currency, littled changed from Friday, when the dollar shrugged off a tame inflation report and rose as traders continued to take profits on the single currency's recent rally.

REUTERS PDS BST0732