* 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)

By Shashwat Chauhan

July 31 (Reuters) - The yen briefly jumped on Friday as

traders remained 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 0.3% at 159.905, 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 1.7%. The move has pulled it

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

boost.

"If authorities fail to convince markets of their

commitment, intervention could reinforce perceptions that

policymakers are running out of options, thereby accelerating

rather than reversing yen depreciation," Shusuke Yamada,

FX/rates strategist at Bank of America said in a note.

"The stakes are high. This may not be a time to

underestimate policymakers' determination to defend the

currency."

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 dollarrecently, and most

analysts polled by Reuters expect the BOJ to raise rates again

to 1.25% by year-end.

Speculators have amassed large bearish bets on the yen, with

weekly data from a U.S. regulator showing net short positions

worth $11.65 billion, near the highest in two years, according

to data published on July 24.

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

beyond psychological support", Japan's top foreign exchange

diplomat said on Friday.

Nikkei reported U.S. authorities conducted rate checks. The

New York Federal Reserve declined to comment.

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 0.9% to stand around1,438 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 0.2% lower to $1.1506

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

Sterling was down 0.1% 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

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

4%.

The Aussie and Kiwi dollar were little

changed at $0.703 and $0.587, respectively.

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

Singapore and Shashwat Chauhan in Bengaluru; Editing by Yoruk

Bahceli and Arun Koyyur)