FOREX-Yen rebounds from Monday's lows, euro/dollar edges down before Fed minutes, US data

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Barclays sees dollar/yen fair value at 140, near-term target at 150

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Dollar on hold against euro before US data, Fed minutes

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Pound drops after data shows unemployment rate rising to five-year high

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By Stefano Rebaudo

Feb 17 (Reuters) - The yen climbed on Tuesday, partly reversing Monday's losses against the euro and dollar, on expectations that Prime Minister Sanae Takaichi's expansionary fiscal policy will continue to give support.

The greenback has risen slightly ?against the euro over the last two sessions as markets await signals, expected ?later this week, on the potential timing of rate cuts by the Federal Reserve.

Ahead of Japan's general elections on February 8, yen long-end yields rose, and the currency slipped, reflecting bets that Takaichi would ?unleash more fiscal stimulus after an election victory, stoking inflation.

Since the vote, the Japanese bond yield curve has flattened, traded inflation has ?held steady and the yen has strengthened, as markets factored in a higher likelihood of portfolio flows returning ?to Japanese assets and a ?shift out of the low real-rate era.

However, some analysts said the swift market reaction looked premature, noting that a repatriation of funds is unlikely in the near term and that the ?Bank of Japan is more likely to raise rates only gradually.

The yen strengthened ?0.25% to 153.15 per dollar, after falling 0.55% the day before and snapping a five-day winning streak. It rose 0.41% to 181.19 against the euro after dropping 0.37%.

Money flowing into Japan's ebullient stock market is expected to support the yen. ?However, Japan's Nikkei fell on Tuesday as investors booked profits, while ?the post-election euphoria was ?ebbing.

Barclays said its model signals the high-140s as fair value for the dollar/yen, which corresponds to levels just before Takaichi won the Liberal Democratic Party leadership race last October, paving the way for her to become prime minister.

Assuming that the "Takaichi premium" ?does not fully unwind, 150 would likely act as a near-term target. The yen dropped on Monday after data showed that Japan's ?economy saw only meagre growth in the fourth quarter.

DOLLAR ON HOLD BEFORE DATA, FED MINUTES Many Asian markets were closed for the Lunar New Year and U.S. markets just returned from the Presidents Day holiday, while investors awaited minutes from the Fed's last meeting and key economic data later in the week.

"It was a rough week for our Fed view, but we decided to stick with calling for three cuts to the funds rate ?by year ?end, almost a full cut more than currently priced in," said John Velis, Americas macro strategist at BNY.

He ?also noted that recent data sent mixed signals - inflation was no longer accelerating but was still above 2%, while the labour market faced increasing ?concerns.

"We won't get a read on what the FOMC itself thinks until the March meeting, when another set of dots is published via the Summary of Economic Projections," Velis said.

The dollar index, which measures the greenback against a basket of currencies, inched 0.1% up to 97.21 after a 0.2% gain in the previous session. The euro slid 0.15% to $1.1834.

Data on Friday showed U.S. consumer prices increased less than expected in January, giving the Fed additional leeway for policy easing this year. Money market traders are pricing about 59 basis points of easing for the rest of this year.

The pound dropped on Tuesday after data showed ?Britain's unemployment rate rose to a five-year high in December while wage growth cooled, potentially adding to the case for further Bank of England rate cuts. It was last down 0.35% at $1.3582.

The Australian dollar weakened 0.15% versus the greenback to $0.7061.

Minutes of the RBA's last policy meeting showed the board was ?uncertain about whether further hikes would be needed, but highlighted ?that inflation had already been above target for three years.

(Reporting by Stefano Rebaudo; Editing by Thomas ?Derpinghaus, and Lincoln Feast, Kim Coghill and Anil D'Silva)