(Updates at 0550 GMT)

By Ankur Banerjee

SINGAPORE, April 11 (Reuters) - The dollar was firm on

Thursday after hotter-than-expected U.S. inflation data squashed

lingering expectations of the Fed starting its rate-cutting

cycle in June, while the yen languished at the levels last seen

in the middle of 1990.

Investor focus will now be on U.S. producer price data and

the European Central Bank's policy meeting later in the day.

The yen's slide to a 34-year low of 153.24 per U.S. dollar

on Wednesday brought intervention fears back as authorities in

Tokyo reiterated that they would not rule out any steps to deal

with excessive swings.

Japan intervened in the currency market three times in 2022

as the yen slid toward what was then a 32-year low of 152 to the

dollar.

On Thursday, the yen strengthened 0.17% to 152.93

per dollar. That was just below the 153.24 level touched on

Wednesday after data showed the U.S. consumer price index rose

0.4% on a monthly basis in March, versus the 0.3% increase

expected by economists polled by Reuters.

The yen is down nearly 8% against the dollar this year, with

the currency rooted near 151 per dollar levels since the Bank of

Japan last month ended eight years of negative interest rates.

Low Japanese rates have made the yen the funding currency of

choice for carry trades for years, in which traders typically

borrow a low-yielding currency to then sell and invest the

proceeds in assets denominated in a higher-yielding one.

Kyle Rodda, senior financial market analyst at Capital.com,

expects Tokyo authorities to keep talking tough and intervene if

things look disorderly.

"The very interesting element is how the Bank of Japan

eventually handles this ... We might see greater hawkishness

from here and that would be the catalyst for a more sustained

turnaround," Rodda said.

Bank of Japan Governor Kazuo Ueda said on Wednesday the

central bank would not directly respond to currency moves in

setting monetary policy, brushing aside market speculation that

the yen's sharp falls could force it to raise interest rates.

FED WAGERS WILT

Following the inflation data, traders drastically dialled

back their bets on interest rate cuts this year as well as when

the Federal Reserve will start its easing cycle.

Adding to those doubts, minutes from the Fed's March

meeting, released on Wednesday, show policymakers were already

disappointed by recent inflation readings before the latest

report.

Markets are now pricing in an 18% chance of the Fed cutting

rates in June, compared with 50% before the CPI data, according

to CME FedWatch tool, with September turning out to be the next

starting point for rate cuts.

Traders are also pricing in 43 basis points of cuts this

year much lower than the 75 basis points of easing projected by

the U.S. central bank. At the start of the year, traders had

priced in over 150 bps of cuts in 2024.

"Two rate cuts in 2024 now look more likely, as the Fed will

want more confidence that inflation is trending sustainably

lower toward their target," said Nicholas Chia, Asia macro

strategist at Standard Chartered.

"While the Fed is not data-point dependent, the totality of

the data clearly suggests there is no need to rush into cuts."

The hot inflation report led to U.S. Treasury spiking higher

and taking the dollar index, which measures the greenback

against six rivals, more than 1% higher on Wednesday to near a

five-month peak of 105.30. The index was last at 105.15 on

Thursday.

The yield on 10-year Treasury notes eased 2.4

basis points to 4.536% on Thursday, hovering near the five-month

peak of 4.568% it touched on Wednesday.

The dollar's surge sent China's yuan to a five-month low

despite the central bank's efforts to steer it higher.

The euro last bought $1.07465, having dropped 1%

on Wednesday ahead of the European Central Bank's policy

decision. The ECB is expected to stand pat on rates but is

likely to signal that a rate cut could come as soon as June.

Sterling was last at $1.2548, up 0.07% on the day.

The Australian dollar was 0.14% higher at $0.6522,

while the New Zealand dollar rose 0.17% to $0.59835.