January 23, 2019 / 3:20 PM / 6 months ago

FOREX-Dollar up vs yen after BOJ leaves policy unchanged

* BOJ keeps policy steady, cuts inflation forecast

* Sterling up after UK's Labour backs bid to avoid no-deal Brexit (Updates rates, comments to U.S. market open; changes dateline, previous LONDON)

By Saqib Iqbal Ahmed

NEW YORK, Jan 23 (Reuters) - The dollar rose against the yen on Wednesday, after the Bank of Japan kept its stimulus program in place, but uncertainties over trade and the global economy kept the greenback in a tight trading range against other major currencies.

The dollar was 0.47 percent higher against the Japanese currency at 109.87 yen.

The BOJ cut its inflation forecasts but maintained its stimulus program, with Governor Haruhiko Kuroda warning of growing risks to the economy from trade protectionism and faltering global demand.

"They are conceding that the risks to inflation and growth are skewed to the downside," said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California. "Of course, that is going to be bearish to the yen."

Against a basket of six major currencies the greenback was about flat on the day.

"The trade conflicts and tensions, the shutdown and certainly more chatter about global growth in 2019, those are the factors that need to be hashed out before we get a clear direction," said Trang.

On Monday, the International Monetary Fund cut its 2019 and 2020 global growth forecasts, citing a bigger-than-expected slowdown in China and the euro zone. Failure to resolve trade tensions could further destabilize the global economy, the IMF said.

The partial U.S. government shutdown, now in its 33rd day, added to investors' unease.

"People are a little bit cautious in terms of putting on excessive positions in any one direction," said Trang.

U.S. Republican Senate Majority Leader Mitch McConnell said he planned to hold a vote on Thursday on a Democratic proposal that would fund the government for three weeks.

Currency traders' attention now shifts to the European Central Bank, which meets on Thursday where market watchers expect it to acknowledge growing threats to the euro zone economy.

Sterling rose above $1.3 after Britain's opposition Labour Party said it was "highly likely" to back an attempt by lawmakers to prevent a disorderly no-deal Brexit.

British Prime Minister Theresa May's proposed agreement on terms for leaving the European Union was rejected by parliament last week in the biggest defeat in modern British history. Since then, lawmakers have been trying to resolve the crisis, but no option has the majority support of parliament.

The Canadian dollar edged higher against its U.S. counterpart, recovering from an earlier two-week low, as gains for stocks and oil prices offset domestic data showing a bigger-than-expected drop in domestic retail sales.

Reporting by Saqib Iqbal Ahmed Editing by Susan Thomas

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