FOREX-Yen hits 34-yr low ahead of key US inflation data

(Updates prices)

By Tom Westbrook

SINGAPORE, March 27 (Reuters) - The dollar rose on Wednesday as more strong U.S. economic data cast doubt over the likelihood of interest rate cuts, sending the yen to a three-decade low and into the zone that drew Japan to intervene in the foreign exchange market in 2022.

The yen briefly traded at 151.97 per dollar in the Asia session, down about 0.2% and its weakest since mid-1990.

Japanese authorities stepped in to defend the yen at 151.94 in 2022 and the finance minister on Wednesday used the same words that preceded that intervention, warning Japan would take "decisive steps" against excessive currency moves.

For the quarter ending later this week the yen is the worst-performing major, down more than 7% on the dollar even after Japan's exit last week from negative interest rates.

"The market is very sensitive to the 152 area," said National Australia Bank strategist Rodrigo Catril. "If we were to break that level then recent history would suggest that intervention would be much more likely."

Bank of Japan board member Naoki Tamura earlier offered a reminder of why traders have been selling yen, reiterating a policy outlook for slow but steady normalisation that would leave Japanese rates below global peers for a long time.

The dollar, meanwhile, is on course for quarterly gains as what had been expectations for steep interest rate cuts this year have been pared in the face of strong economic data and reticence to cut from central bankers.

China's yuan and the New Zealand dollar traded near four-month lows.

The yuan weakened to 7.2285 per dollar despite a strong fix of its trading band. The New Zealand dollar fell 0.2% to $0.5988, not helped by a downward revision to the government's economic growth forecasts.

CORE FOCUS

The market's main focus this week is on U.S. core inflation figures due on Good Friday, though already a bigger-than-expected jump in U.S. durable goods orders in data published on Wednesday provided a bit of a dollar boost ahead of that.

"There's this nagging concern about the risk of a shallower Fed easing than the market is currently anticipating," said Bank of Singapore strategist Moh Siong Sim.

Australian data published on Wednesday showed inflation holding at a two-year low of 3.4% in February, reinforcing market wagers that the next move in interest rates there would be down. The Aussie slipped 0.3% to $0.6512.

It is down 4.4% for the quarter.

The euro, at $1.0829, is more or less in the middle of a range it has kept for a year and is down 1.9% for the quarter.

The Swiss franc, still reeling from a surprise rate cut in Switzerland last week, fell about 0.5% on the dollar to a four-month low of 0.9042 on Tuesday.

It is down about 7% for the first quarter of the year. The U.S. dollar index is up 3% for the quarter to 104.4.

Sterling was steady at $1.2618 and was broadly steady for the quarter, too, down just 0.8%.

On Tuesday, Bank of England policymaker Catherine Mann said she changed her mind to vote for a rate hold last week, instead of a hike, due to consumers turning more stingy. But she still believes financial markets have too many cuts priced in.

(Reporting by Tom Westbrook; Editing by Sam Holmes and Lincoln Feast.)