* Focus on BOJ's interest rate decision later on Friday
* Some media reports say BOJ likely to hold rates steady
* But market generally expects a rate cut
By Kaori Kaneko
TOKYO, Dec 19 (Reuters) - The dollar was steady against the yen on Friday with investors cautious before the outcome from the Bank of Japan's interest rate decision later on Friday.
The dollar surged against the yen the previous day as speculation mounted that Japan may intervene in the market to stem the Japanese currency's appreciation.
The U.S. currency dropped to its weakest level in over 13 years against the yen earlier this week following the unprecedented rate cut by the Federal Reserve, bringing the U.S. interest rates below the BOJ's benchmark rate target.
The BOJ is expected to debate cutting interest rates from an already rock bottom 0.3 percent or taking further measures such as buying commercial paper to ease corporate credit strains.
But several Japanese media reported that the BOJ will keep rates steady, saying some within the bank want to examine the effect of its previous rate cut in October on the economy before lowering rates further.
"While there is some speculation about the BOJ keeping rates steady, while the market in general is expecting a rate cut," said Masato Mori, senior manager at NTT Smarttrade.
"A BOJ rate cut with additional steps may slow down the yen's appreciation against the dollar but the general trend of dollar weakness is likely to continue," he said.
Mori also said if Japan's central bank leave rates on hold, the yen's appreciation against the dollar could accelerate, fuelling speculation of intervention.
The dollar was little changed at 89.45 yen from late U.S. trade on Thursday. The U.S. currency fell as low as 87.13 yen on trading platform EBS on Wednesday, the lowest since mid-1995.
The euro rose 0.4 percent to $1.4299 from the previous day when it surged as high as $1.4720 on EBS, nearly 3-month high.
Against the yen, the euro rose 0.3 percent to 127.80 yen, after rising above 131.00 yen on Thursday, the highest about 1-½ month.
The euro remain supported, buoyed by the view that euro zone interest rates will not fall as steeply as those in other major economies.
But traders said the euro may later lose some of its strength against other major currencies as pressure for further rate cuts in the euro zone could grow, given the dismal outlook for the euro zone economy. (Reporting by Kaori Kaneko; Editing by Edwina Gibbs)