The euro slipped from an 11-month high against the yen and 14-month peak versus the dollar as investors focused on how much room the European Central Bank has for raising interest rates beyond a widely expected tightening later in the day.

 The yen held above a six-month trough against the dollar. The Bank of Japan met market expectations that it would keep monetary policy steady and signal its readiness to ease policy further, bucking a global trend of central banks withdrawing excess liquidity put in place during the financial crisis

 The ECB is set to raise its benchmark rate by 25 basis points for the first time since July 2008. Portugal's request for a European bailout has not changed the view the ECB would follow up with more interest rate hikes, but many believe the euro has risen too fast too far and is overdue a correction.

 Analysts also say ECB President Jean-Claude Trichet must sound hawkish enough to keep alive expectations for around 100 basis points in rate hikes by November and for the euro to achieve fresh gains. more

The euro slipped back from 11-month highs against the yen on Monday and a five-month peak against the dollar, as analysts said expectations for higher euro zone interest rates were becoming priced in.

 The Bank of Japan is likely to downgrade its economic assessment on Wednesday, while comments from a Federal Reserve official on Friday highlighted uncertainty over the need to tighten monetary policy in the United States.

 Markets expect the European Central Bank to raise interest rates by 25 basis points from a record low on Thursday, with a further two hikes factored in by year-end.

 The euro rose to $1.4269 against the dollar but stalled ahead of its November 2010 high, seen as resistance around $1.4281. It later eased to $1.4230 to trade around flat on the day.

 "I think the euro is close to putting in a top now as the monetary policy divergence story is almost fully priced," said Lee Hardman, currency strategist at BTM-UFJ. more