(Updates ahead of U.S. market open)

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Dollar gains for fifth session ahead of Fed meeting

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Yen hits 4-month low a day after BOJ ends negative rates

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Benchmark bond yields dip from recent peaks

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Oil weakens, gold sags from record high

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

By Marc Jones

LONDON, March 20 (Reuters) - The dollar rose for a fifth

straight session on Wednesday, while stock and bond markets trod

water as traders braced for what could be a crucial Federal

Reserve meeting later in the day.

Japan's yen was at a four-month low a day after

the Bank of Japan finally ditched its sub-zero rates, but the

focus was already on whether the Fed signals two U.S. rate cuts

are now likely this year rather than the three markets have been

hoping for.

Its quandary is whether progress on inflation has stalled

and, if so, whether U.S. rates - which drive the global cost of

borrowing - need to stay in the current 5.00%-5.25% range longer

than anyone - investors, consumers, politicians and U.S. central

bank officials themselves - had expected.

The greenback standing almost 0.5% higher on day

suggested many traders now suspect they do, although they also

had the yen backpedaling and the pound losing ground

too after some softer-than-expected UK inflation data.

There wasn't much movement in Wall Street futures ahead of

the restart there, while in Europe the main morning action

was a tumble in luxury goods shares after a hefty profit warning

from Gucci maker Kering.

Bond markets were laser-focused on the Fed. Benchmark U.S.

10-year Treasury yields were just off a 2024 high hit this week,

although the UK inflation numbers meant European yields were on

a bit of a slide .

"The market is completely indecisive on the number of Fed

rate cuts," said Mathieu Savary, Chief European Strategist at

BCA Research, describing it as "a complete coin toss" between

two and three at the moment.

The yen's fall also showed how markets almost always buy the

rumour and sell the fact.

"Really that (BOJ move away from negative rates) should have

lifted the yen, but instead it has fallen over 1.5% (over the

last couple of days) because people expected the step," Savary

said.

The dollar was up 0.5% on the day to 151.70 yen, a

fresh four-month high, and close to the 152 level that prompted

Japanese authorities to intervene in FX markets in late 2022.

While Japan's historic shift away from negative interest

rates and massive stimulus ushered in a new era of economic

policy on Tuesday, analysts expect the BOJ's monetary

normalisation to proceed at a glacial pace.

That has meant an extended lifespan for the popular "carry"

trades where investors borrow yen to buy higher yielding

currencies.

"It is clear that the BOJ tightening has done nothing to

shake a belief in carry," said Alan Ruskin, global head of G10

FX strategy at Deutsche Bank.

FED AHEAD

Tokyo's Nikkei was closed for a holiday in Japan

overnight, but the yen's weakness lifted futures 0.4%

higher.

MSCI's broadest index of Asia-Pacific shares outside Japan

finished flat although Seoul jumped 1.3%

, driven by a 5.6% surge in Samsung's share price

after Nvidia ( NVDA ) said it was qualifying the

South Korean chipmaker's high bandwidth memory (HBM) chips.

Chinese shares closed fractionally higher too after the

central bank there left benchmark lending rates unchanged, as

widely expected. The Shanghai Composite gained 0.5%,

while Hong Kong's Hang Seng index crept up 0.2%.

For Fed followers around the world, the risk is that its the

new economic projections - the fabled dot plot - signals just

two interest rate cuts, down from three, or a later start to the

cutting cycle than June.

Top European Central Bank rate setters, meanwhile, have

endorsed June as the likely month to start its cuts, and some

would like as many as four this year.

"Our decisions will have to remain data dependent and

meeting-by-meeting," ECB President Christine Lagarde told a

conference in Frankfurt on Wednesday. "This implies that, even

after the first rate cut, we cannot pre-commit to a particular

rate path".

The euro was down against the dollar on the day, but was at

its strongest against the Japanese currency since 2008 at 164.66

yen. The Aussie dollar fetched 98.90 yen,

just a notch below a nine-year high too.

Oil prices retreated from multi-month highs, however, due to

the strong dollar. Brent eased 0.7% to $86.80 a barrel,

while gold prices also ticked down to $2,154 per ounce,

some distance away from this month's record high of $2,194.99.

(Additional reporting by Stella Qiu in Sydney

Editing by Mark Potter)