* Dollar/yen trades below 85, not far from 15-year low
* BOJ expands fixed rate fund supply program
* Euro falls vs dollar as stocks decline (Adds comments, details; changes byline)
By Aleksandra Michalska and Vivianne Rodrigues
NEW YORK, Aug 30 (Reuters) - The yen rose broadly on Monday after the Bank of Japan's decision to expand cheap loans to banks disappointed investors who had looked for more aggressive measures to curb the yen's strength.
The dollar fell below 85 yen and the euro lost more than 1 percent against the Japanese currency after the BOJ beefed up the supply of fixed-rate loans to banks to 30 trillion yen ($351 billion) from 20 trillion yen.
Investors saw the central bank's moves as a symbolic gesture that will do little to halt the yen's climb, putting the onus on the Japanese government to act to protect exports and fight deflation if the yen continues to rally. For details, see [ID:nTOE67S01V]
"The Bank of Japan's move was fairly incremental. It was just an extension of already existing plan," said Sacha Tihanyi, a currency strategist in Toronto at Bank of Nova Scotia's Scotia Capital. "I don't get the sense that what the BOJ is doing will move the yen anytime soon."
In late afternoon trading, the dollar fell 0.7 percent to 84.60 yen JPY=, down from the day's high above 85.92 hit before the BOJ announcement, according to Reuters data. The dollar earlier hit a session low of 84.56 yen, not far from its 15-year low of 83.58 yen set on electronic trading platform EBS last week.
"The yen will probably stay exactly where it is now, said Nick Bennenbroek, head of currency strategy at Wells Fargo. "Clearly, additional monetary policies and extra funds that the Bank of Japan added aren't enough to see the yen weaken."
Adding to strength in the yen were comments from Bank of Japan Governor Masaaki Shirakawa, who said after meeting with Prime Minister Naoto Kan that Kan had not made any requests regarding the central bank's monetary policy. Shirakawa refused to comment on recent currency moves.
Earlier in the day, Shirakawa said policy steps will not be bound by moves in the yen and stocks and the rise in the yen was down to investor aversion to risk. [ID:nTKZ006509]
ADDING TO LONG POSITIONS
The BOJ's move and the official comments encouraged investors to add to long yen positions on speculation that currency intervention by Japan was not imminent.
A trader said stop-loss orders to sell the dollar under 84.90 yen helped accelerate the pair's slide. Support comes in at around 84.50, while resistance is at 86 yen. The euro EURJPY=R fell 1.2 percent to 107.36 yen.
Aside from the yen, currency movements were limited in European trade, with London markets closed for a holiday.
The euro lost 0.8 percent to $1.2661 EUR=, as losses in the U.S. stock market weighed on risk appetite.
Investors are now turning attention to the release on Tuesday of minutes from the U.S. Federal Reserve's Aug. 10 meeting to get further insight into why policy makers opted to buy more Treasury securities. Following that is the widely watched U.S. non-farm payrolls report on Friday.
Data from the Commodity Futures Trading Commission showed investors increased long positions in the yen and the Swiss franc in the week to Aug. 24 as worries about a slowing global economy drove investors to perceived safe-haven currencies. [IMM/FX]
Until recently, the Japanese yen was one of the most widely used funding currencies in so-called carry trades, in which investors borrow in a low-yielding asset to finance purchases in higher-yielding currencies.
But as the Japanese currency has strengthened, its efficiency as a funding currency has diminished.
In fact, using yen to fund the carry trade has not been a good strategy in 2010 to date, according to Reuters data. Borrowing 1 million yen to buy the equivalent in New Zealand dollars would have lost an investor 93,415.61 yen; buying Australian dollars would have lost an investor 66,266.38 yen.
Analysts expect the yen to rise further against the dollar if expectations mount that the U.S. Federal Reserve will act to spur growth, moving more aggressively than the BOJ.
Fed Chairman Ben Bernanke said on Friday the U.S. economic recovery has weakened more than expected and the Fed stands ready to act if needed to spur slowing growth. [ID:nN27258237] (Additional reporting by Wanfeng Zhou and Nick Olivari in New York; Editing by Leslie Adler)