FOREX-Yen near 2 1/2-year low as BOJ meeting nears
* BOJ easing expectations keep hammering yen
* Some market player wary of corrective rebound in yen
* Euro near 4-week low, ECB seen holding rates steady
By Hideyuki Sano
TOKYO, Jan 10 (Reuters) - The yen was on the defensive near a 2 1/2-year low on Thursday on expectations Bank of Japan policy will take a fresh and bold approach to boost inflation later this month.
The yen last stood at 87.97 yen to the dollar, down slightly from late U.S. levels, and edging near a 2 1/2-year low of 88.48 yen.
Its price action could become volatile as the BOJ Jan. 21-22 policy meeting nears, as seen in the yen's roughly 1.2 percent rebound from that low earlier this week.
"I feel it's about time a for correction to set in after a big fall in the yen. Short-term players will likely take profits as soon as the yen stops falling," said Teppei Ino, currency strategist at the Bank of Tokyo-Mitsubishi UFJ.
"But then again, there's also chance expectations of BOJ easing could keep the yen under pressure until the bank's policy meeting," he added.
The bank is widely expected to heed Prime Minister Shinzo Abe's call for adopting a 2 percent inflation target at its next policy meeting.
Expectations that Abe would push the BOJ to adopt more forceful monetary stimulus measures have driven the yen sharply lower in recent months.
At Friday's peak, the dollar had gained nearly 12 percent against the yen since early November, and traders said the rally was due for a pause.
"After a 10-12 percent rise, there is bound to be some consolidation and a shakeout could possibly see dollar drop to 84 yen," said Howard Jones, partner at money manager RMG Wealth Management in London.
"But any consolidation will be short-lived. From a macro view, with a huge change of policy taking place in Japan and the government determined to drive the yen lower, one must not underestimate them. We are looking at the dollar hitting 100 yen during the course of this year."
The euro stood at $1.3060, edging closer to a four-week low of $1.2998 hit last Friday.
But it could be supported for now as the European Central Bank is expected to keep interest rates on hold at its first policy meeting of the year on Thursday, even though some market players think the bank may cut them some time in coming months.
Against the yen, the euro stood at 115.08 yen, just less than one yen below a 1 1/2-year high of 115.995 yen.
In Asia, a big focus is on Chinese trade data. Further signs of recovery in the Chinese economy could help the Aussie dollar, as Australia tends to benefit from Chinese demand for raw materials.
The Aussie last stood at $1.0503, slightly below late U.S. levels but still within reach of three-week high of $1.0536 hit on Wednesday.
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