FOREX- Yen dives as risk appetite roars; euro subdued

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* Bank of Japan reaffirms dovish policy stance

* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee

At the outcome of a two-day monetary policy meeting onFriday, the Bank of Japan stuck to its dovish stance. Whilesounding optimistic on growth, Governor Haruhiko Kurodareiterated there would be no plan to change monetary policybefore the 2 percent inflation target is met. L4N1QR2HY

Also fanning broad-based risk appetite was news that U.S.President Donald Trump was prepared to meet North Korea's KimJong Un in what would be the first face-to-face encounterbetween the two countries' leaders. That could potentially marka major breakthrough in nuclear tensions with Pyongyang. urn:newsml:reuters.com:*:nL2N1QQ239

The news helped dollar/yen, which has fallen 7 percent sincethe start of the year on concerns that the outbreak of a tradewar would derail a global growth recovery, to bounce sharply onFriday. The yen also fell 0.5 percent and 0.7 percent againstthe euro EURJPY=D3 and sterling GBPJPY=D3 respectively.

"We are trying to find a bottom on dollar/yen and the otherthing to watch for is when the typical year-end repatriationflows that are made by Japanese institutions for the fiscal yearend abates, and that might push dollar/yen even higher," saidKenneth Broux, a currency strategist at Societe Generale.

The greenback had gained ground earlier against the yen assome fears of a global trade war receded. Trump imposed importtariffs on steel and aluminium, while softening his stance byannouncing exemptions for Canada and Mexico, and leaving openthe chance for other countries to obtain their own. urn:newsml:reuters.com:*:nL4N1QQ1M8

"There are a lot of potential exemptions, so I think safehaven flows into the yen have abated," said Roy Teo, investmentstrategist for LGT Bank in Singapore.

The U.S. dollar had tumbled to 16-month lows against thesafe-haven yen late last week as concerns about a trade wargripped markets after Trump initially announced his plan fortariffs on all imports of steel and aluminium.

Against a broad basket of currencies .DXY , the dollar wasbroadly flat on the day at 90.158.

The euro nursed its losses after falling on Thursday asEuropean Central Bank President Mario Draghi, whileacknowledging faster growth in Europe, said regional inflationremained subdued and rising protectionism is a risk.

Draghi expressed his view on these issues at his newsconference after a central bank policy meeting. It overshadowedthe ECB's dropping of a long-standing pledge to increase itsbond purchases if needed, a move that briefly spurred buying ofthe single currency. urn:newsml:reuters.com:*:nL5N1QQ1WR

The euro held steady at $1.2310EUR=EBS , after falling 0.8percent on Thursday. (Reporting by Saikat ChatterjeeEditing by Catherine Evans) ((saikat.chatterjee@thomsonreuters.com; +44-20-7542-1713;Reuters Messaging: saikat.chatterjee.reuters.com@reuters.net))

Referenced Symbols:EFX,

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