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TOKYO, May 17 (Reuters) The dollar stayed in sight of an eight-month low against the yen on Wednesday, after weak housing and inflation figures suggested the two-year run of rising U.S. interest rates is nearly over.

The dollar took a hit the previous day on data that showed U.S.

producer prices excluding food and energy rose just 0.1 percent last month, half the rate that had been forecast, while April housing starts also came in below analysts' expectations.

The Federal Reserve is pinning any further rises in its overnight rate, currently at 5 percent, to signs of more buoyancy in the economy and the threat of inflation.

For more clues about the likelihood that the Fed will hold off on boosting rates at its policy meeting next month, the market was looking to the consumer price index for April due later in the day.

''Even a slight fall in core CPI would be enough to show that inflation risks are subsiding, which would give more reason for the Fed not to raise in June,'' said a trader at a Japanese bank. ''This could lead to more dollar selling.'' Economists in a Reuters poll expect the data to show the core number edged up 0.2 percent last month.

The dollar has seesawed this week, taking a cue from fluctuating prices for commodities such as gold, but most in the market forecast the dollar to keep falling on expectations that its rate advantage will narrow in coming months.

In early Tokyo trade, the dollar was little changed at 109.75 yen It fell 0.7 percent on Tuesday, creeping back towards an eight-month low of 109.31 yen struck at the end of last week.

The euro was little changed at $1.2850 after climbing nearly 0.5 percent in the previous session.

The single European currency was at 141.05 yen, near a seven-week low of 140.86 yen struck on Tuesday.

The dollar's rate advantage is widely expected to narrow in coming months on forecasts that the European Central Bank will lift rates to 2.75 percent in June and that the Bank of Japan will boost rates from near zero during the July-September quarter.

REUTERS SK PM0605