TOKYO, Feb 22 The yen tumbled to a record low against the euro on Thursday, a day after t

TOKYO, Feb 22 (Reuters) The yen tumbled to a record low against the euro on Thursday, a day after the Bank of Japan raised interest rates to a decade-high 0.5 percent but reiterated the pace of further rate tightening will be slow.

The Australian dollar posted its biggest one-day gain in two years against the yen the previous day as investors see the BOJ's slow pace of tightening policy as more reason to favour high-yielding currencies over low-yielding ones like the yen.

''Market players feel confident that the BOJ will not hike rates for a while,'' said Tsutomu Soma, a senior trader at Okasan Securities. ''People seem to feel absolutely no hesitation towards selling the yen.'' The euro pushed up to a high of 159.13 yen the highest since the single currency was launched in 1999 and up 1.3 percent for the year.

The dollar edged up to 121.05 yen a day after climbing nearly 1 percent against the Japanese currency.

After a two-day policy meeting, BOJ Governor Toshihiko Fukui repeated on Wednesday the central bank would raise interest rates slowly.

Japan's ultra-low rates have encouraged players to use the yen as source of cheap funds to buy higher-yielding currencies in the carry trade and have prompted many domestic investors to seek better returns abroad.

A Reuters poll taken after a post-meeting news conference by Fukui on Wednesday showed that the majority of market participants see the BOJ waiting until the second half of this year before possibly raising rates again. INT] By contrast, the European Central Bank is seen raising rates in March to 3.75 percent.

Fukui also said not all aspects of the yen's weakness can be described as a distortion but an excessive build-up of yen carry trades may hurt the economy.

Data showing a surprisingly big pick-up in core consumer prices in January gave the dollar support the previous day by making market players rethink expectations for the Federal Reserve to cut interest rates later this year.

The minutes from the Fed's Jan.30-31 meeting released on Wednesday also suggested top central bank officials were uncertain inflation was firmly on a downward path, underpinning the dollar.

The euro was steady at $1.3135 against the dollar, holding near a six-week high of $1.3190 struck earlier in the week.

REUTERS PDS RN0751