(Updates with current levels as of 04:15 GMT)

By Brigid Riley

TOKYO, April 30 (Reuters) - The yen struggled to hold

its line against the dollar on Tuesday after making sharp gains

the previous day sparked by suspected intervention by Japanese

authorities.

The currency inched down 0.30% to 156.79 per

dollar but was well off its 34-year low of 160.245 hit on Monday

when traders say yen-buying intervention by Tokyo drove a

eye-catching rebound of nearly six yen. It briefly popped above

157 earlier in Tuesday's session.

Japanese authorities haven't confirmed that they had stepped

into the currency market in support of the yen, but markets

remain on heightened intervention alert ahead of the Federal

Reserve's monetary policy review this week.

Official figures that would reveal whether intervention did

in fact occur won't be available until late May.

While some market players had zeroed in on 160 yen per

dollar as the possible trigger for intervention, analysts said

Japanese authorities may not be targeting particular levels.

"Obviously, the still wide policy rate gulf between the Fed

and BOJ could continue to keep USD/JPY buoyant. For that reason,

we believe Japanese officials desire more flexibility in terms

of what levels to intervene at," said Wei Liang Chang, a

currency and credit strategist at DBS.

Despite the yen's biggest one-day gain this year on the

dollar, the Japanese currency still sits lower than it was

before the Bank of Japan's (BOJ) policy announcement last week.

It has also suffered its largest monthly decline since January.

The BOJ's go-slow approach on interest rate increases,

following its landmark decision to ditch negative rates in

March, has traders betting that Japanese bond yields will remain

low for an extended period. In contrast, U.S. rates are still

relatively high and provide enough latitude for yen bears.

The Fed begins its two-day monetary policy meeting on

Tuesday, where it's expected to hold rates at 5.25%-5.5%, with

U.S. inflation proving to be sticky.

It's also expected to strike a hawkish message, meaning more

yen selling is likely, said Carol Kong, a currency strategist at

the Commonwealth Bank of Australia.

"The implication is the MOF will likely be forced to step in

more than once to slow the rise in USD/JPY."

DIVERGENT ECONOMIC OUTLOOKS

While the timing of any possible rate hikes by the BOJ

remains vague, traders continue to pare back bets of Fed rate

cuts this year amid hotter-than-expected U.S. economic data and

stubborn inflation numbers.

A rate cut in September was looking like a close call at

just 44%, according to CME Group's FedWatch tool.

The dollar rose to 0.14% to 105.83 against a basket of

currencies ahead of the Fed's meeting, after slipping

0.25% in the previous session.

However, other major central banks such as the European

Central Bank (ECB) and the Bank of England may begin to cut

rates in the near future.

Markets could glean more clues on the timing of ECB's

rate-easing cycle from European inflation data this week due

later on Tuesday.

The euro fell 0.17% to $1.0701. Sterling

was last trading at $1.2541, down 0.16% on the day.

Elsewhere, a soft retail sales number out of Australia sent

the Aussie sliding, last down 0.53% at $0.653, as

markets further trimmed the risk of another rate hike by

September.

The kiwi fell 0.50% to $0.595.

In China, manufacturing and services activity both

expanded at a

slower pace

in April, official surveys showed, suggesting some loss of

momentum for the world's second-biggest economy at the start of

the second quarter.

The offshore Chinese yuan slipped 0.14% to $7.2523 per

dollar.

The yuan has lost 2% against the dollar so far this year

and is on course for its fourth straight monthly onshore loss.

In cryptocurrencies, bitcoin last rose 1.07% to

$63,618.00.