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Written by: Staff

TOKYO, Aug 25 (Reuters) The yen slipped on Friday after weaker-than-expected consumer price data reinforced views that Japanese interest rates will rise only slowly, keeping the yen at a disadvantage over higher-yielding currencies.

The dollar also inched up against the euro, extending gains made in the previous session as traders awaited a speech by Federal Reserve Chairman Ben Bernanke to get a better indication of where U.S. rates are heading in the near future.

Data on Friday showed that Japan's core consumer price index rose 0.2 percent in July from a year earlier, against expectations for a 0.5 percent rise.

''There were some last-minute forecasts that we could get a big figure, and we ended up with this, so the yen has come under pressure,'' said Fumihiko Kawano, forex manager at Nomura Securities.

''The data has not changed expectations that the BOJ will raise rates either at the end of the year or at the beginning of next year.'' The dollar rose 0.15 percent against the yen to around 116.70 yen after the CPI figures bolstered the market's view that the Bank of Japan will take its time in raising rates after lifting them in July for the first time in six years, to 0.25 percent.

With Japanese interest rates lagging far behind those of its currency rivals, traders said the yen would likely stay under pressure.

The dollar added to its gains against the yen after inching up on Thursday after traders brushed off data showing a fall in U.S. new home sales.

The dollar edged up to around $1.2745 against the euro. The single European currency has inched lower this week as dealers trimmed back long positions in it that have been piling up on expectations that rates in the euro zone will keep rising.

The European Central Bank is expected to keep raising rates after bumping them up to 3 percent earlier this month, while the Federal Reserve is widely expected to keep rates unchanged at 5.25 percent at its next meeting in September.

Bernanke will deliver a speech in Jackson Hole, Wyoming, at 1400 GMT. Traders say any suggestion that the Fed's two-year credit-tightening cycle has come to an end could spur selling in the dollar.


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