FOREX-Yen steadies, investors wary before BOJ meeting
* Yen pulls back from one-month highs vs dollar, euro
* Investors await easing measures from BOJ
* Euro zone manufacturing PMI weak, Cyprus worries linger
By Jessica Mortimer
LONDON, April 2 (Reuters) - The yen steadied against the dollar and euro on Tuesday, pulling back from one-month highs hit earlier in the session, as expectations of monetary easing in Japan later this week curbed demand.
The euro recovered from recent lows against the dollar but was seen vulnerable before a European Central Bank meeting and due to concerns about fallout from Cyprus' financial rescue and Italy's political quagmire.
Traders reported thin liquidity in major currencies as European markets reopened after the Easter holiday, and said price moves were expected to be subdued.
The dollar was close to flat on the day at 93.23 yen. It was lifted by reported Asian central bank demand after earlier hitting 92.57 yen, its lowest since March 1, following lacklustre U.S. factory data on Monday.
Analysts said investors were likely to use gains in the yen as an opportunity to sell it at higher levels before an April 3-4 Bank of Japan policy meeting.
The BOJ is widely expected to ramp up its bond buying and to extend the maturities of the bonds it purchases under new Governor Haruhiko Kuroda.
But the market has already priced in hefty easing measures, making it hard for policymakers to surprise investors.
"We need to see aggressive, bold and clear language from the BOJ for the dollar to re-break 94.30 yen and suggest that this technical damage has been reversed," said Hans Redeker, head of global foreign exchange strategy at Morgan Stanley.
The dollar retreated from Monday's intraday high of 94.38 yen after U.S. data showed factory activity slowed in March. This raised concerns the world's largest economy was losing momentum and helped the euro, analysts said.
The euro dipped 0.1 percent against the yen to 119.64 yen , paring losses after hitting a five-week low of 119.15 yen. Chart support for the euro was seen at its late February low of 118.74 yen.
EURO STILL SHAKY
The euro also fell 0.1 percent against the dollar to $1.2833, hovering within sight of a four-month low of $1.2750 hit last week.
Euro zone purchasing managers' surveys added to concerns about the single currency's outlook by showing a deepening decline in manufacturing activity in March, with Italy and Spain particularly weak.
The euro was expected to stay below chart resistance at the March 23 high around $1.3050 due to concerns about Cyprus' bailout and possible ramifications for other indebted euro zone countries.
Cyprus detailed losses over the weekend of around 60 percent for depositors holding more than 100,000 euros as part of the rescue agreed just over a week ago.
"The ongoing newsflow from the euro zone tends to be pretty grim at best. It seems hard to bet against a weaker euro, at least in the short term," said Jeremy Stretch, head of currency strategy at CIBC World Markets.
Stretch said the euro could slide towards $1.25 over the coming quarter, with initial resistance around last week's low.
Investors were also cautious before Thursday's ECB meeting. Although interest rates are expected to be left on hold, analysts saw a small chance of a cut.
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