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TOKYO, Aug 2 (Reuters) The dollar eased to near a three-week low against the yen on Wednesday as traders remained sceptical that the Federal Reserve will raise interest rates next week despite robust manufacturing data and a pickup in inflation.

The dollar rose initially in U.S. trading on Tuesday after the data but gains were wiped out by a wave of technical selling.

With the market looking to July nonfarm payrolls data due on Friday to gauge the chances of a rate rise, the overall impact of the indicators was limited, traders and analysts said.

''There are still some events lying ahead....Things have not been settled yet in terms of the outlook for interest rates,'' said Tomoko Fujii, senior economist and strategist for Bank of America.

The dollar stood at 114.37 yen as of 0108 GMT, down slightly from levels in late U.S. trading and within sight of a three-week low near 114.20 yen hit on Monday. The euro was little changed at $1.2820 but down against the Japanese currency at 146.68 yen.

Sterling rose to a two-month high of $1.8777 ahead of a two-day Bank of England policy meeting that starts later this session, and was last traded at $1.8771 as of 0108 GMT.

Solid British housing market data released on Tuesday kept alive some hopes for a British rate rise this week, although only seven out of 46 economists polled by Reuters last week expected the central bank to nudge rates up to 4.75 percent on Thursday.

The Australian dollar rose with its yield appeal intact after the Reserve Bank of Australia (RBA) raised interest rates as expected and cemented market expectations for a further tightening to 6.25 percent by year-end.

The Aussie dipped to an intraday low of $0.7632 immediately after the RBA raised its cash rate by 25 basis points to 6 percent, but quickly bounced back and was last traded at $0.7672.

EYES ON FED Many traders continue to expect that the Fed will stand pat at its Aug. 8 policy meeting and keep interest rates unchanged at 5.25 percent.

As of late U.S. trading on Tuesday, U.S. short-term interest rate futures indicated a 38 percent chance that the Fed will raise rates on Aug. 8, up slightly from 32 percent on Monday.

The change in market expectations was mild even though the Institute for Supply Management's index of national factory activity rose to a better-than-expected 54.7 in July, and separate data showed that inflation was on the rise.

The Commerce Department said its core personal consumption expenditures price index rose to an annual 2.4 percent in June, the highest in nearly four years and above the Fed's presumed comfort zone for the rate.

The dollar's rise on such data was short-lived, however.

''I think the dollar blipped up (in U.S. trading) simply because positions had been tilted toward short dollar positions,'' a Japanese trust bank trader said, adding that the dollar likely lost steam once buy-backs subsided.

The dollar may find some support at levels around 114 yen, the trader said, adding that Japanese importers may step in to buy dollars around there.

During Asian trading, remarks by Bank of Japan policy board member Atsushi Mizuno later this session may provide some trading incentives. Mizuno is regarded as one of the more hawkish members of the nine-member BOJ policy board.

REUTERS VJ BST0733