* Yen surrenders some gains from coordinated intervention

* BOJ leaves rates unchanged at 1%, delivers hawkish signal

* Dollar index set for biggest weekly fall since April

(Updates prices throughout, adds analyst comments)

By Shashwat Chauhan

July 31 (Reuters) - The yen steadied after rising briefly

earlier on Friday, with traders remaining alert for a second

round of intervention after Japanese authorities stepped in to

prop up their currency a day earlier.

The yen traded up as much as 0.6% at 158.535 per

dollar in London morning trading but quickly gave up its gains.

It was last down 0.46% at 160.21, having weakened to as low

as 160.90 against the dollar after the BOJ earlier in the day

kept short-term interest rates steady at 1% in a widely expected

move.

Thursday's yen-buying and dollar-selling intervention set

the Japanese currency for its biggest weekly rise since February

and a monthly jump of more than 1.5%. The move has pulled it

away from four-decade lows but failed to give it a sustained

boost.

"Previous interventions have provided temporary relief, but

the yen has often resumed its decline once the immediate support

faded," said Harun Thilak, head of trading for North America at

Validus Risk Management.

"This highlights the limits of direct intervention when

broader macroeconomic and interest-rate fundamentals remain

unfavourable."

The BOJ, which hiked rates to a 31-year high last month,

warned for the first time that underlying inflation could exceed

its target, signalling further rate hikes from as soon as

September.

BOJ Governor Kazuo Ueda said many of the board members'

inflation forecasts are fairly high and they see risks skewed to

the upside.

Japan's slow pace of rate hikes has been blamed for pushing

the yen to 40-year lows below 163 per dollar recently, and most

analysts polled by Reuters expect the BOJ to raise rates again

to 1.25% by year-end.

Tokyo was also receiving support from the U.S. that "goes

beyond psychological support", Japan's top foreign exchange

diplomat said on Friday.

Thursday's moves resulted in spot yen trading volumes

surging to their highest in 10 years on the EBS trading platform

and futures trading volumes hitting highest on record, the CME

Group said.

In a rare coordinated move, South Korea also conducted

dollar-selling intervention on Thursday to support its currency,

a market source told Reuters.

The won rose to a nine-month high before paring some

gains, last down 1.36% to stand around 1442.49 against the

dollar.

WAVE OF INTEREST-RATE DECISIONS THIS WEEK

The BOJ meeting followed the U.S. Federal Reserve's decision

to leave interest rates unchanged, which bruised the dollar as

traders questioned whether the Fed's new chair was serious about

containing inflation.

That has added to the dollar's pain with the greenback

heading for its biggest weekly fall since early April and a

monthly loss of nearly 1% against a basket of peers.

On Friday, it was a touch higher after falling around 1.5%

in the last three sessions.

"The market is a bit lost in translation in the sense that

forward guidance has been literally abandoned by all the major

central banks and now the market is moving quite fast when it

comes to the monetary policy expectations," said Mabrouk

Chetouane, head of global market strategy at Natixis Investment

Managers in Paris.

In Europe, the euro inched 0.4% lower to $1.1483

after hitting a six-week high in the last session.

Sterling was down 0.4% against the dollar after

nearing a two-week high on Thursday.

The Bank of England also kept its main lending rate steady

in a widely-expected decision on Thursday.

Norway's crown was on track to notch the biggest

monthly gains against the U.S. dollar among major currencies, up

nearly 4% and likely benefiting from higher oil prices due to

Norway's net exporter status.

The Aussie and Kiwi dollar were little

changed at $0.7018 and $0.5861, respectively.

In cryptocurrencies, bitcoin slipped 1.5% to

$63,739.6, on pace to snap a four-week winning streak.

(Reporting by Jiaxing Li in Hong Kong, Ankur Banerjee in

Singapore and Shashwat Chauhan in Bengaluru; Editing by Yoruk

Bahceli and Arun Koyyur)