* Yen at four-week highs vs USD
* Pullback in U.S. manufacturing knocks USD lower
* Yen bears fear more disappointment from BOJ meeting
By Ian Chua
SYDNEY, April 2 (Reuters) - The yen rose to a one-month high against the dollar early in Asia on Tuesday after softer-than-expected U.S. manufacturing data prompted investors to sell the greenback.
Further gains for the Japanese currency could be limited as investors wait to see exactly what the Bank of Japan (BOJ) will deliver at its April 3-4 policy meeting. The market has already priced in a lot of easing from the central bank making it hard for policy makers to surprise.
The dollar was at 93.22 yen, having fallen as far as 93.06. It has shed around 3.5 percent since peaking at a 3-1/2 year high of 96.71 on March 12.
The greenback came under pressure as U.S. Treasury yields slid after data showed factory activity grew at the slowest rate in three months in March. The report raised worries the U.S. economy is losing momentum due to government spending cuts.
The dollar index fell 0.6 percent, suffering its third biggest one-day fall this year, recoiling further from a near 8-month peak set just last week.
Thin market conditions, with most of Europe closed for the Easter holiday, contributed to a choppy session that saw the yen also rise against the euro and commodity currencies.
The euro traded at 119.81 yen after briefly dipping to 119.49, a low not seen since late February, while the Australian dollar was at 97.27 yen, having skidded to a four-week low of 97.02.
With the dollar under pressure, the euro drifted up to $1.2846, pulling away from a four-month trough of $1.2750 plumbed last week. Still, the common currency remained weighed by political uncertainty in Italy and worries about the region’s debt problem and dour economic outlook.
“As the fundamental outlook for the euro region turns increasingly bleak, the ECB remains poised to strike a dovish tone for monetary policy,” said David Song, currency analyst at DailyFX.
“We may see a growing number of central bank officials show a greater willingness to push the benchmark interest rate to a fresh record-low as the recession threatens price stability.”
The European Central Bank holds its policy meeting on Thursday, ahead of U.S. non-farm payrolls on Friday.
The Australian dollar also bounced up smartly from a one-week low of $1.0386 to $1.0425, but its immediate fortunes depend on the outcome of the Reserve Bank of Australia’s (RBA) policy meeting at 0330 GMT.
The RBA is expected to hold its cash rate steady at a record low 3.0 percent, and the market is keen to see if it will drop its easing bias or keep the door open to more cuts.
Any signs the RBA has ended its easing cycle could give Aussie dollar bulls a green light to buy the currency.
“We expect the RBA to drop its easing bias, despite the high exchange rate, given the recent run of better data,” analysts at Barclays Capital wrote in a client note.