By Simon Falush
LONDON, Oct 11 (Reuters) - The euro rallied against the yen on Thursday after the Bank of Japan left rates unchanged and also gained versus the dollar as expectations for the Federal Reserve to cut rates remained intact.
The euro was on track for its largest one-day rise against the yen in nearly two weeks after the BOJ left its benchmark overnight call rate unchanged at 0.5 percent by a vote of 8-1, the same vote tally as the past three meetings.
BOJ Governor Toshihiko Fukui said upward price pressure was gradually rising, but Japanese wages were not rising as much as expected.
Prior to the rate announcement, some traders bought the yen on speculation that more BOJ board members would dissent and thus boost expectations for a rate rise this year.
"Euro crosses have been pushed up by the BOJ vote to stay on hold," said Niels From, currency strategist at Dresdner Kleinwort in Frankfurt.
"The risk remains that the BOJ will hike less than the market expects, keeping the yen as a funding currency. With the Fed set to cut and the European Central Bank remaining firmly on hold, this is a positive for the euro/yen carry trade," he said, referring to widespread borrowing of low-yielding currencies like the yen to fund purchases of higher yielding assets.
At 0748 GMT the euro was up 0.43 percent against the yen at 166.38 yen <EURJPY=>, around its highest since late July. The euro also gained 0.4 percent against the dollar to reach $1.4197.
The euro has risen by about 1 percent against the dollar in the past three trading sessions as investors continue to price in at least one more U.S. rate cut by the end of the year, even after last Friday's strong jobs data.
Markets show investors are attaching a roughly 34 percent chance of another cut at this month's policy meeting, which is down from around 64 percent prior to the employment report, but still a 76 percent chance of a 25 basis point rate cut in December.
ECB President Trichet speaks in Moscow at 0915 GMT and analysts will listen for any further insight on the likely path of euro zone monetary policy.
Investors will also look to revised second quarter GDP data at 0900 GMT for clues on the health of the euro zone's economy.
The euro fell sharply against the Swedish crown after Swedish inflation data came in above expectations.
The Swedish crown hit an 8-month high versus the euro <EURSEK=> at 9.1133 crowns after the data and hit a fresh 15-year high against the dollar <SEK=> at 6.4184 crowns.
Meanwhile, sterling slipped 0.2 percent to $2.0378 <GBP=>, down from around $2.0425 in late U.S. trading, after data showed British house prices fell at their fastest pace in two years in the three months to September. [ID:nL10226011]
Against sterling, the euro <EURGBP=> rose 0.6 percent to 69.62 pence, in its biggest daily rally so far in two weeks.
The Canadian dollar hit a three-decade high versus the U.S. dollar, touching C$0.9777 <CAD=> as a continued rally in oil and commodity prices boosts the Canadian currency.