DOLLAR GAINS AGAINST YEN AS TRADERS AWAIT WORD ON INTEREST RATES

DOLLAR GAINS AGAINST YEN AS TRADERS AWAIT WORD ON INTEREST RATES

* Noon Tuesday - The dollar gained 0.21 percent against the yen, as traders mostly were standing pat, awaiting the afternoon's U.S. Federal Reserve announcement on interest rates.

The dominant assumption was the Fed would leave rates unchanged, though most indicators aside from prices suggest a tightening economy. A case could be made for higher rates but the Fed was expected to wait.Indonesia's rupiah weakened to 12,100 against the dollar from 12,000.

A wire report quoted a minor Australian official giving his view that China's currency will have to be devalued.

''Clearly southern China is losing its competitiveness against other Asian currencies,'' according to Grant Latta, deputy chairman of the Export Finance Insurance Corp.

* 9 a.m. Tuesday - The yen held steady following its Monday decline, with the Bank of Japan saying its policy board decided unanimously against loosening monetary policy.

Indonesia's currency held steady after President Suharto said there will be new elections. The slight overnight movements saw the dollar fall 0.17 percent against the yen and fall 0.10 percent against the Deutsche mark. The mark fell 0.08 percent against the yen.

The decision not to change Japan's monetary policy came in the face of some domestic pressure to increase money supply, a move likely to boost economic activity but weaken the yen.

The head of Japan's Association of Corporate Executives described the weak yen as a plus for the economy but added that an interest rate hike might become feasible in the coming months.

* 3 p.m. Monday - The dollar rose to a seven-year high of 136.38 yen Monday as Indonesian tensions continued to run high and there was no sign of Bank of Japan intervention to stop the yen's precipitous fall.

The yen also was hurt by talk of potential conflict between Indian and Pakistan over Kashmir.

The dollar was trading Monday afternoon at 136.27 yen, up from 134.70 yen late Friday, and at 1.7858 Deutsche marks, up from DM1.7850.

Trading was cautious ahead of the Federal Reserve's meeting on Tuesday.