Dollar nurses losses against yen after BOJ holds policy steady

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The U.S. dollar pared losses against the yen on Thursday, but was still on track to notch its biggest daily loss against the Japanese currency in eight months, after U.S. consumer spending data provided some optimism on the U.S. economic outlook.

The dollar was last down 3 percent against the yen at 108.1 after the Bank of Japan's surprise decision not to further ease monetary policy. The greenback's last level against the yen was up from its earlier 10-day low of 107.93 yen.

The euro was last down 2.9 percent against the yen at 122.71 , also after hitting a 10-day low of 122.56 yen.

Analysts said U.S. data showing consumer spending increased at a 1.9 percent rate in the first quarter was better than some market participants were expecting and helped the dollar pare losses against the yen.

Pro: Dollar falling off highs not enough to move Fed
Pro: Dollar falling off highs not enough to move Fed

"The numbers we got today were probably a bit better than expected," said Brian Daingerfield, currency strategist for RBS Securities in Stamford, Connecticut, in reference to the consumer spending data.

Consumer spending was the slowest since the first quarter of 2015 and marked a deceleration from the fourth quarter's 2.4 percent rate. The figure was still better than the 1.7 percent rate some were expecting, Daingerfield said.

In addition to the BOJ's decision to hold steady in the face of soft global demand and a sharp rise in the yen, the dollar was also hit by the Federal Reserve's decision on Wednesday not to give a strong sign of another rise in rates in June.

"The fact that the Fed was dovish and the BOJ did not deliver was certainly the hard combination that drove dollar/yen lower," said Sebastien Galy, currency strategist at Deutsche Bank in New York.

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The U.S. dollar index, which measures the greenback against a basket of six major currencies, was last down 0.69 percent at 93.74. The euro was last 0.26 percent higher against the dollar at $1.1352, down from a one-week high of $1.1368 touched earlier .