(Updated at 10:24 a.m. ET/ 1424 GMT)

By Chuck Mikolajczak

NEW YORK, April 29 (Reuters) - Japan's currency surged

as much as 5 yen against the dollar from a fresh 34-year low hit

earlier on Monday, with traders citing yen-buying intervention

by Japanese authorities for the first time in 18 months.

The outsized move kicked off what could be a busy week for

currency traders, with the U.S. Federal Reserve capping off its

two-day policy meeting on Wednesday, the U.S. jobs report on

Friday, and European inflation data throughout the week,

beginning with German and Spain on Monday.

The dollar fell as far as 154.4 yen in several

rapid moves that knocked it from an intraday high of 160.245,

its highest since 1990.

The greenback was last at 156.83 yen, down 0.94%. Trading in

Asia was thinner than normal due to Japan's Golden Week holiday.

"The timing actually makes sense because you're going to

have a thinner market, so they're going to get more effect out

of whatever they do and that's why they chose to do it

relatively early in the Asian market, they can push it around

more," said Joseph Trevisani, senior analyst at FX Street in New

York.

Japan's top currency diplomat Masato Kanda declined to

comment when asked if authorities had intervened, though traders

said they had and the Wall Street Journal said Japanese

authorities had intervened, citing people familiar with the

matter.

Markets had been anticipating that Japan might intervene to

prop up the yen after the currency fell more than 10% against

the dollar this year.

The Commodity Futures Trading Commission's weekly

commitments of traders report showed that non-commercial

traders, a category that includes speculative trades and hedge

funds, had increased their yen short positions to

179,919 contracts in the week ended April 23, the largest since

2007.

The yen had moved about 3.5 yen on Friday after the Bank of

Japan kept policy settings unchanged and offered few clues on

reducing its Japanese government bond (JGB) purchases - a move

that might have put a floor under the currency.

Japan's suspected intervention by the central bank comes

just days ahead of the Federal Reserve's May 1 policy

announcement, with markets widely expecting the Fed will keep

rates unchanged, according to CME's FedWatch Tool, given the

solid labor market and recent inflation data that was hotter

than anticipated.

Investors have continually had to dial back expectations for

the timing and magnitude of U.S. rate cuts this year, and the

disparity in policy stances from the Bank of Japan and Fed have

fueled the yen weakness.

"Over time with this interest differential between the BoJ

and the Fed and the obvious reluctance of the BoJ to do anything

about that, to change their decades old policy, now essentially

zero interest rates, it's tough to build up any momentum for the

Japanese yen going the other way to strengthen," said Trevisani.

In addition, other major central banks such as the European

Central Bank and Bank of England are seen as more likely to

begin to cut rates in the near future.

The dollar index fell 0.09% at 105.86, with the euro

up 0.08% at $1.0701. Sterling strengthened 0.33%

to $1.2529.

European flash inflation data this week will give more

information for the ECB to consider. Spain's European

Union-harmonized inflation rate stood at 3.4% in the 12 months

through April, up from 3.3%. Data from Germany showed inflation

rose slightly in April due to higher food prices and a smaller

drop in energy prices.