SINGAPORE, Dec 18 Reuters The yen stood firm on Monday as the Bank of Japan BOJ kicked off its twoday monetary policy meeting, with traders awaiting a decision on whether the dovish central bank could finally unwind its ultraloose policy settings.

In the broader market, the U.S. dollar started the week on the back foot, extending its fall from last week in the wake of the Federal Reserve39;s policy meeting which signalled the possibility of interest rate cuts next year.

The yen steadied at 142.25 per dollar, after gaining nearly 2 last week on the back of the dollar39;s decline.

The Japanese currency has had a volatile few weeks as markets struggle to get a grip on how soon the BOJ could phase out its negative interest rate policy, with comments from Governor Kazuo Ueda this month initially sparking a huge rally in the yen.

That was later reversed on news that a policy shift was unlikely to come as early as December, and investors now await Tuesday39;s BOJ decision for further clarity on the bank39;s rate outlook.

The meeting will be relevant and important in terms of what the BOJ does, and there are some in the market that still expect that maybe there39;s a surprise, said Rodrigo Catril, senior FX strategist at National Australia Bank.

Against the euro, the yen edged more than 0.2 lower to 155.27, but was not too far from a fourmonth top of 153.215 per euro hit earlier this month. Sterling was little changed at 180.44 yen .

RATE CUTS LOOM?

Elsewhere, the…