* Dollar drops against the yen as BoJ holds steady
* U.S. stocks mostly lower after disappointing U.S. GDP
* Brent crude falls to around $103 a barrel
By Leah Schnurr
NEW YORK, April 26 The U.S. dollar tumbled against the yen on Friday after the Bank of Japan left its monetary policy unchanged, while benchmark U.S. bond yields fell to near 4-1/2-month lows after the U.S. economy grew less than expected in the first quarter.
The disappointing growth rate spurred concerns about a tepid outlook for the United States which, along with recent concerns that China's growth is slowing, also hit the price of oil. Brent crude fell to just above $103 a barrel after rising $3 in the past two sessions.
China and the United States are the world's two largest oil consumers.
The BoJ held off from announcing new monetary policy on Friday, which was not unexpected, but board members suggested inflation may still fall short of the central bank's target for some time. The outlook on inflation in the bank's semi-annual economic report highlighted concerns that the BoJ has an unrealistic goal in its battle to end 15 years of deflation.
The BoJ's announcement in early April of plans for $1.4 trillion in new monetary stimulus triggered a sharp selloff in the yen. However, traders said market expectations for ongoing weakness in the yen had come too far, too quickly. Recent lackluster U.S. data has added to dollar selling, which accelerated on Friday.
"The selling started to feed on itself, and everyone started to jump on the selling bandwagon," said Charles St-Arnaud, foreign exchange strategist at Nomura Securities in New York.
The dollar fell as low 97.54 yen and was down 1.2 percent at 98.02 in late New York trade.
U.S. gross domestic product expanded at a 2.5 percent annual rate in the first quarter. While that was a jump from the tepid growth seen in the final quarter of last year, it disappointed expectations for a 3 percent pace.
The data and weakness on Wall Street lifted bond prices, with 30-year Treasuries up 28/32 at 105-07/32 to yield 2.862 percent.
The benchmark 10-year note's yield fell to 1.665 percent, just a shade higher than the low of 1.643 percent reached earlier in the week.
"The thoughts about slower growth and disinflation have been mostly priced at these levels," said Mike Cullinane, head of Treasuries trading at D.A. Davidson in St. Petersburg, Florida. "If we were to see another month of weak data, we could see yields grind lower."
The data could raise doubts about the ability of the economy to absorb government spending cuts and higher taxes and may fuel speculation of the possibility of more Federal Reserve measures to boost growth, or at least keep the Fed's current stimulus plans in place.
Wall Street ended little changed in light volume, with a slight loss on the S&P 500 ending a five-day winning streak for the index.
"We traded off a decent amount after the GDP number but we didn't break any technical levels or really didn't get much momentum in the selloff past late morning," said Paul Zemsky, head of asset allocation at ING Investment Management in New York.
"I guess there was some bottom fishing. There was so much fear of poor earnings going into earnings season that this is still somewhat of a positive surprise."
A drop in Amazon.com weighed on the market after the Internet retailer gave a disappointing outlook, sending its shares down more than 7 percent.
The Dow Jones industrial average edged up 11.75 points, or 0.08 percent, to 14,712.55. The Standard & Poor's 500 Index slipped 2.92 points, or 0.18 percent, to 1,582.24. The Nasdaq Composite Index fell 10.72 points, or 0.33 percent, to 3,279.26.
Investors in European equities also took a breather after five days of gains. Europe's top shares on the FTSEurofirst 300 closed down 0.4 percent, and world shares were off 0.2 percent.
A growing belief that the European Central Bank will react to the recent deterioration in the euro zone's economy by cutting interest rates next Thursday helped European stocks rise this week, pushed the euro to a three-week low and contributed to a fall in bond yields.
A gloomy new set of surveys from the ECB further supported those rate cut calls, as they underscored the slowdown in lending and the difficulties companies in the bloc are facing to get credit.
Brent fell 25 cents to $103.16 a barrel, while U.S. crude settled down 64 cents at $93.00.