The yen was squeezed on Thursday, weighed by sluggish Japanese wages, while the dollar was becalmed as traders waited on US inflation data to see whether bets on rate cuts were justified.

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The yen fell 0.9 per cent on the dollar overnight and 1.2 per cent on the euro after data showed workers' real wages shrank for a 20th straight month in November - confounding officials wishes to see wage gains before tightening policy.

The yen was under gentle pressure at 145.55 per dollar in morning trade and hit a six-week low of 159.99 per euro. The euro bought $1.0974 and other majors were steady on the dollar with all eyes on the US data due at 1330 GMT.

The dollar has steadied in early 2024 after sliding through the latter months of 2023 as the Federal Reserve indicated it was finished with rate hikes and traders priced in steep cuts.

While that pricing has moderated slightly, futures still show that market sees 140 basis points (bps) of cuts this year and a 2/3 chance they begin as soon as March - a view that could be challenged if inflation surprises on the high side.

New York Fed President John Williams said on Wednesday that it's still too soon to call for rate cuts as the central bank still has distance to go getting inflation back to 2 per cent.

Core inflation (USCPFY=ECI) is seen falling to 3.8 per cent year on year for December, its slowest since early 2021.

"Despite this year's adjustment in market pricing, in our view investors are still too optimistically positioned for Fed rate cuts," said Rabobank senior FX strategist Jane Foley in a note to clients.

"We expect further correction in this outlook and consequently expect the dollar to see some support on a 1-to-3-month view," she said, with the euro to face pressure from a weakening German economy.

"We see scope for euro/dollar to dip to $1.05 on a 3-month view, before the impact of Fed rate cuts boosts risk appetite and weakens the dollar in the second half of the year."

The dollar index hovered at 102.3 on Thursday. Sterling bought $1.2750 and the Australian and New Zealand dollars were contained in recent ranges. The Aussie traded at $0.6707 and the kiwi at $0.6232.

Bitcoin , having gained more than 50 per cent since October on speculation that bitcoin-owning exchange-traded funds would win US approval was volatile but ultimately little changed at $46,600 when the US securities regulator gave its green light.

Besides the US inflation data, traders are speculating that further rate cuts in China are imminent and had on Wednesday sold the yuan to a one-month low of 7.1772 per dollar.

South Korea's central bank kept its policy rate unchanged for an eighth consecutive meeting, as expected, leaving the won steady at 1,318 to the dollar.