The dollar slipped against the yen on Friday after the Bank of Japan stood pat on monetary policy, disappointing some speculators who had bet that the central bank would expand its already massive stimulus.

The dollar was down 0.2 per cent at 120.82 yen after dipping to as low as 120.29 following the central bank's announcement.

The BOJ decision had drawn more attention than usual after a run of downbeat Japanese indicators had fanned expectations that the central bank would increase the stimulus dosage.

The Japanese central bank, however, appeared confident that a tight job market will lift wages and consumption sufficiently to push inflation towards its 2 per cent target.

"The reaction by dollar/yen to the BOJ decision was smaller than I expected. While the view among economists may have been split down the middle regarding what the BOJ would today, actual market players seemed to have mostly priced in the possibility of no easing," said Masafumi Yamamoto, a senior strategist at Monex in Tokyo.

"There is still the Japanese GDP to be released in November, and those who still think the BOJ will ease later this year have a chance to build their case after first gauging the data," he said.

While the yen's reaction to the BOJ's decision was limited in Asia, the market braced for some turbulence should European traders react to comments by Governor Haruhiko Kuroda when he appears before the press at 0630 GMT to explain the central bank's stance.

"I think today's decision was appropriate and came as I expected. The biggest factor is that the US Fed stood pat this month but has left open the possibility of a rate hike in December. The BOJ will probably wait to see whether the Fed may move in December, before deciding to ease further," said Hiromichi Shirakawa, chief economist at Credit Suisse Securities in Japan.

The euro was steady at $1.0979 after gaining about 0.5 per cent overnight on an unexpected improvement in euro zone economic sentiment and signs of faster-than-expected inflation in Germany.

The data helped the common currency bounce from a 2-1/2-month low of $1.0896 struck midweek when the US Federal Reserve helped keep alive prospects of an interest rate hike in December.

The Australian dollar nudged up on bargain hunting but remained shaky after taking hits earlier in the week on the Fed's hawkish-sounding statements and risks of a rate cut at home.

The Aussie was up 0.5 per cent at $0.7110 but remained within an arm's length of a 3-week low of $0.7067.

The dollar index was nearly flat at 97.259, having pulled back from a 2-1/2-month high of 97.818 struck on Wednesday as the euro rebounded.

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