The dollar ended the Asian session relatively unchanged from earlier in the day, holding on to small gains as the yen stayed under pressure after the Bank of Japan's rate hike yesterday. Activity slowed in the afternoon, with no upcoming major events to inspire traders. The BoJ's nine-member policy board on Wednesday voted 8-1 to raise the overnight call rate target to 0.5 pct from 0.25 pct, its first in seven months and the second in the current slow credit-tightening cycle. The BoJ also said it will continue to raise rates, albeit gradually, a message perceived to be dovish and one that was reinforced by BoJ governor Toshihiko Fukui in his testimony to the upper house financial affairs committee. "Taking Fukui's comment that consecutive rate hikes are unlikely at face value, policy action at the next meeting on March 19-20 has, therefore, been ruled out," noted DBS Bank analysts. "Our view has been that the process to normalize interest rates will proceed one rate hike per quarter, until the overnight call rate reaches 1.25 pct by fourth quarter 2007. This view remains unchanged." With Japanese rates seen likely to remain at current levels for the next few months, investors continued to use the Japanese currency to fund carry trades, in their search for higher yielding assets. "Looking ahead, (we) expect the global yen carry trade to continue to have legs with BoJ governor indicating that the risk of unwinding of this phenomena is not a major influence in the central bank's monetary policy decisions, while adding that it is not a major cause of yen weakness," OCBC Investment Research wrote in a note. The euro rose to a fresh record high against the yen in morning trade in Asia, while the dollar strengthened to a lesser extent, although there were some pullbacks after Japan reported stronger-than-expected trade data. The trade balance turned to a surplus of 4.4 bln yen in January from a deficit of 353.5 bln yen a year earlier, up for the third consecutive month, the Ministry of Finance said. The consensus call was for a deficit of 149.5 bln yen. Euro-yen ran through its previous record high of 159.00 yen early in the day and quickly ascended to a new peak of 159.13 yen, while dollar-yen rose to a morning high of 121.12 yen. Both dollar-yen and euro-yen eased off their best levels as the morning ended, with the former drifting near 121.00 yen again, while the cross was held just under 159.00 yen. "Banks that positioned for (dollar-yen) stops above 121.20 yen were disappointed when the dollar ran into thick supply near 121.10 yen," said a dealer in Asia. Through the afternoon, the dollar-yen traded in a fairly tight 20-point range between 120.90 yen and 121.10 yen, while the cross was also lackluster within a range of 158.85-159.00 yen.