FOREX-Divergence play weighs on yen, UK PMI surveys eyed

* Yen inches down as minds shift to BOJ meeting next week

* Euro little changed after ECB meeting, PMI surveys

* First (Other OTC: FSTC - news) post-Brexit British surveys keenly awaited

By Patrick Graham

LONDON, July 22 (Reuters) - Expectations of a renewed divergence between Japanese and U.S (Other OTC: UBGXF - news) . monetary policy weighed on the yen on Friday as markets mulled the first major business sentiment surveys on the health of the European economy since last month's Brexit vote.

In early trade in London, the yen was down 0.3 percent on the day, having recovered from six-week lows after Bank of Japan Governor Haruhiko Kuroda dented speculation it may be preparing a radical "helicopter money" economic stimulus.

That has not shifted many investors' conviction that the BOJ will deliver some form of new stimulus next week, however, and French bank BNP Paribas (LSE: 0HB5.L - news) issued a recommendation to sell the yen while also sounding downbeat on the euro's near-term prospects.

"We now expect the euro to trade down to $1.07 by the end of the third quarter, while we expect the dollar to reach 111 yen, with Fed hikes contrasting with ECB and BOJ easing to drive USD gains," the bank's London-based FX strategy team said in a note.

"This (yen) trade should benefit from three key events: BOJ easing, Japanese fiscal easing and a September Fed rate hike."

Having bounced back to as strong as 105.88 yen per dollar in Asian time, the yen traded 0.3 percent lower at 106.12 per dollar.

The dollar was steadier against other major currencies. Flash Purchasing Managers' Index (PMI) surveys in the euro zone were the latest to sound more upbeat on the economic fallout of Britain's vote to leave the European Union than had been feared.

The pound inched higher against the euro and the dollar ahead of the UK surveys, due at 0830 GMT.

"It (Other OTC: ITGL - news) 's all about the PMIs this morning," said Kamal Sharma, a strategist with Bank of America Merrill Lynch in London.

"There's a lot of post-Brexit data coming out in the next couple of weeks. But the inability of the pound to rise tells you that the market is very comfortable selling any rallies at the moment."

The euro traded roughly flat at $1.1022, slightly above this week's low of $1.0980 but little changed from late U.S. levels on Thursday and also roughly flat on the week. (Editing by Dale Hudson)