FOREX-Wounded dollar eyes BOJ, Aussie slides to 2-week low
* Focus on BOJ Kuroda's comments later in data for near-term catalysts
* Aussie on defensive after being hit by host of negatives
By Shinichi Saoshiro
TOKYO, May 21 (Reuters) - Lower U.S. Treasury yields held the dollar near a 3-1/2 month low against the yen early on Wednesday, with markets looking for potential catalysts from the Bank of Japan's policy review later in the day.
The dollar dipped 0.1 percent to 101.25 yen, within striking distance of 101.10 hit on Monday, its lowest since Feb. 5. The dollar has shed roughly 1 percent against the yen so far this month, nudged lower by a steady decline in U.S. yields.
U.S. Treasuries prices rose on Tuesday after New York Federal Reserve President William Dudley said the central bank will likely be slow in raising interest rates.
The immediate focus in Asia was on the Bank of Japan's monetary policy decision and Governor Haruhiko Kuroda's news conference.
Participants say the markets have mostly factored in the BOJ holding steady on policy and was largely looking to the governor's post-meeting comments.
While few expect Kuroda to diverge from his generally optimistic stance on the economy, traders will be watching for any signs of further bullishness that may add to the weight of views suggesting no fresh monetary easing is on the cards over the near term.
However, any hint the central bank may be ready to ease in the next few months could hit the yen.
"The BOJ is widely seen keeping its economic assessment unchanged and under such expectations naturally interest falls on the governor's view on the economy. The yen would be sold if he raises expectations for near-term easing," said Shinichiro Kadota, chief Japan FX strategist at Barclays in Tokyo.
The Australian dollar extended losses against its U.S. counterpart and plumbed a fresh two-week low, hurt by a host of negative factors.
The Aussie slipped 0.1 percent to $0.9231 after brushing $0.9228, its lowest since May 2.
The antipodean currency was knocked by a slide in prices of iron ore, Australia's biggest export earner and media reports that suggested the country's top notch AAA credit rating was at risk.
A local newspaper reported that rating agency Standards and Poor's could review Australia's AAA rating should the government fail to realise large cuts to the budget in coming years. link.reuters.com/xar49v
The story was later disputed by a S&P spokesman.
The euro stood little changed at $1.3703. The fall in U.S. yields helped the single currency pull back from a 2-1/2 month low of $1.3648 hit last week on expectations the European Central Bank will ease monetary policy in June.
The euro could still face some pressure ahead of potentially destabilising European Parliament elections later this week, where votes for anti-austerity, eurosceptic parties look set to increase. (Editing by Shri Navaratnam)