FOREX-Dollar at seven year high against yen before Fed minutes

(Recasts, adds data, changes byline and dateline from previous LONDON)

By Karen Brettell

NEW YORK, Nov 19 (Reuters) - The dollar hit a seven-year high against the yen on Wednesday ahead of Federal Reserve meeting minutes that could shed more light on the divergence in monetary policy between the U.S. central bank and its major global peers.

The yen also weakened to a six-year trough against the euro, after Japanese Prime Minister Shinzo Abe postponed a sales tax hike in a move seen as supportive for stock markets but negative for the currency.

The dollar rose as high as 117.67 yen, its highest level since October 2007, and was last trading at 117.62 yen. The Japanese currency was seen leading the move.

"It's definitely yen led, all the major surprises have been coming out of Japan beginning with the BOJ monetary policy move and subsequently the delay of the sales tax and the election announcement (by Abe)," said Steven Englander, global head of G10 foreign exchange strategy at CitiFX in New York.

The Bank of Japan kept policy unchanged on Wednesday, as expected.

Focus now turns to the Federal Reserve, which will release minutes of its October meeting.

Petr Krpata, currency strategist at ING, said the minutes are likely to reiterate a hawkish tone as reflected in the Fed's statement after its October meeting. The statement after that meeting noted that the labor market was improving and inflation was not likely to stay subdued for long.

"Such a message will likely send U.S. rates and the dollar higher and increase expectations for a more material shift in the FOMC bias at the Dec. 19 meeting," Krpata said.

However, a longer discussion on inflation, after the Fed de-emphasized concerns about low levels of inflation in the post-meeting statement, could surprise traders expecting a more hawkish tone.

"We think there may be more discussion on inflation and inflation risks to the downside in the minutes, so it could come out as slightly more dovish than what the market is looking for," Englander said.

Solid (KOSDAQ: 050890.KQ - news) housing data on Wednesday was seen as supportive of the dollar as it reflects the improving U.S. economy.

U.S. housing permits rose to near a 6-1/2-year high in October even as housing starts unexpectedly fell.

"If we're beginning to see an upward move in housing it really gives legs to the U.S. recovery and to the dollar," Englander said. (Additional reporting by Anirban Nag in London; Editing by Chizu Nomiyama)