* Dollar gains for fifth session ahead of Fed meeting
* Yen hits 4-month low a day after BOJ ends negative rates
* Benchmark bond yields dip from recent peaks
* Oil weakens, gold sags from record high
* Graphic: World FX rates http://tmsnrt.rs/2egbfVh
LONDON, March 20 (Reuters) - The dollar rose for a fifth straight session on Wednesday, while stock and bond markets trod water as traders braced for what could be a crucial Federal Reserve meeting later in the day.
Japan's yen was at a 4-month low after the BOJ finally ditched sub-zero rates, but the focus was on whether the Fed signals that it now expects to cut U.S. rates twice this year rather than the three that markets have been hoping for.
The greenback was standing almost 0.5% higher on the day in Europe, where the pound dipped after soft UK inflation data and luxury goods stocks tumbled after a hefty profit warning from Gucci maker Kering.
Bond markets were awaiting the Fed, with U.S. 10-year Treasury yields, which tend to drive the global cost of borrowing, off recent highs while Gilt yields were also on the slide after the UK inflation numbers.
"The market is completely indecisive on the number of Fed rate cuts," said Mathieu Savary, Chief European Strategist at BCA Research, describing it as "a complete coin toss" between two and three at the moment.
The yen's fall also showed how markets almost always buy the rumour and sell the fact.
"Really that (BOJ move away from negative rates) should have lifted the yen, but instead it has fallen over 1.5% (over the last couple of days) because people expected the step," he said.
The dollar was up 0.6% on the day to 151.70 yen, a fresh four-month high, and close to the 152 level that prompted Japanese authorities to intervene in FX markets in late 2022.
While Japan's historic shift away from negative interest rates and massive stimulus ushered in a new era of economic policy, analysts expect the BOJ's monetary normalisation to proceed at a glacial pace.
That has meant an extended lifespan for the popular carry trades where investors borrow yen to buy higher yielding currencies.
"It is clear that the BOJ tightening has done nothing to shake a belief in carry," said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank.
FED AHEAD
Tokyo's Nikkei had been closed for a holiday in Japan, but the yen's weakness lifted futures 0.4% higher.
MSCI's broadest index of Asia-Pacific shares outside Japan finished flat. Taiwanese shares fell 0.4% while South Korean shares jumped 1.3%, driven by a 5.6% surge in Samsung Electronics after Nvidia said it was qualifying the South Korean chipmaker's high bandwidth memory (HBM) chips.
Chinese shares edged higher too after the central bank there left benchmark lending rates unchanged, as widely expected. The Shanghai Composite index gained 0.5%, while Hong Kong's Hang Seng index crept up 0.2%.
For the Fed, focus is on the risk that its the new economic projections - the fabled dot plot - signals just two interest rate cuts, down from three, or a later start to the cutting cycle than June.
A slew of European Central Bank officials including its President Christine Lagarde will be also speaking later. Top rate setters have endorsed June as the likely month to start its cuts, and some would like as many as four this year.
Although the euro was down against the dollar on the day, at 164.66 yen it was at its strongest against the Japanese currency since 2008. The Aussie dollar fetched 98.90 yen, just a notch below a nine-year high too.
Oil prices retreated from multi-month highs however due to the strong dollar. Brent eased 0.7% to $86.80 a barrel, while gold prices also ticked down to $2,154 per ounce, some distance away from this month's record high of $2,194.99. (Reporting by Marc Jones; Editing by Alexander Smith)
