TOKYO, Oct 12 The dollar steadied against the euro on Friday, as investors waited for a s

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TOKYO, Oct 12 (Reuters) The dollar steadied against the euro on Friday, as investors waited for a string of U.S. data to shed more light on the timing of the next Federal Reserve interest rate cut.

The yen stayed off a 2-1/2-month low against the euro but remained under downward pressure after the Bank of Japan on Thursday held interest rates steady at 0.5 percent, making investors feel comfortable about taking risky positions such as yen carry trades.

In those trades, investors use the low-yielding yen to finance purchases of assets that offer higher returns elsewhere.

Traders eyed moves in equities markets, as higher share prices would further spur investor risk appetite.

Tokyo's Nikkei share average was down 0.2 percent in early trade.

Bank of Japan Governor Toshihiko Fukui said on Thursday he saw increasing upward pressure on prices, reinforcing expectations the bank will raise interest rates by early next year.

But he also acknowledged that nervous global financial markets and problems in the U.S. housing sector were delaying his push to raise Japanese interest rates.

''Market participants are finding it hard to buy the yen as the BOJ keeps a cautious stance in tightening policy,'' said a senior trader at a Japanese brokerage.

Meanwhile, the European Central Bank's more upbeat view on its economy gives the euro support, the trader said.

ECB President Jean-Claude Trichet said on Thursday that economic growth in the euro zone and globally remains robust, despite recent financial market volatility.

In early Asian trade, the euro stood at $1.4200 steady from late U.S. trading on Thursday.

The euro has bounced back from a two-week low of around $1.4015 struck on Tuesday, and crawled towards a record high of around $1.4280 hit earlier this month.

The euro edged up 0.2 percent against the yen to 166.80 yen The European single currency struck a 2-1/2-month high of 167.63 yen on electronic trading platform EBS on Thursday.

The dollar rose 0.2 percent against the yen to 117.48 yen from late New York trade on Thursday, when the U.S. currency hit a two-month high of 117.79 yen on EBS.

The Fed slashed interest rates by an aggressive 50 basis points to 4.75 percent in September, and while the odds of an additional cut this month have receded somewhat, investors see a roughly 70 percent chance of more easing this year.

Investors will look to readings on September retail sales and producer prices due later in the day for clues to the state of the world's biggest economy and the chances of a Fed interest rate cut on Oct. 31.

If retail sales data is much weaker than expected, that could reheat expectations for a October rate cut, analysts said.

Reuters DKS VP0604

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