Yen tests seven-month high ahead of BOJ policy decision; dollar wobbles

By Rae Wee SINGAPORE (Reuters) - The Japanese yen held near an over seven-month peak on Monday, as traders, in the lead up to the Bank of Japan's monetary policy

decision this week, ramped up bets that the central bank could make further tweaks to its yield control policy. The yen was last 0.1% lower at 128.01 per dollar, having

surged to 127.46 per dollar on Friday, its highest since May last year. Markets have been pressing for the BOJ to shift away from its ultra-easy monetary policy, which on

Friday caused the yield on Japan's benchmark 10-year government bonds to breach the central bank's new ceiling. With the BOJ due to announce its monetary policy decision on

Wednesday, expectations are for further tweaks to its yield control policy or a full abandonment of it. "I think the whole world will be focused on Wednesday ... and

probably the week in G10 (currencies) will be defined by what happens to the yen and yen crosses, out of that," said Ray Attrill, head of FX strategy at National Australia Bank

(NAB). "I don't think (the BOJ) has the luxury of time to say that they're going to assess and wait until Q2 or Kuroda to see out his term without making any further

changes." Current BOJ Governor Haruhiko Kuroda will step down in April. The BOJ's yield curve control policy has been a huge factor behind the yen's 12% slump last

year, and since the central bank's shock decision last December to widen the band around its yield target, the yen has jumped more than 6%. Elsewhere, the U.S. dollar

struggled to recover from its decline after last week's selloff on data showing that U.S consumer prices fell for the first time in more than 2-1/2 years in December.