Dollar up against yen, steady against others

NEW YORK, Dec 26 (Reuters) The dollar strengthened against the yen, hitting two-month highs on Tuesday, on weak Japanese inflation and spending data, while the greenback remained flat against other major currencies in holiday-thinned trading.

Many European financial markets are closed for the Boxing Day holiday. ''We don't really have major U.S. economic numbers today and London and Europe financial markets are still on holiday,'' said Alex Beuzelin, senior market analyst, at Ruesch International in Washington.

''We may be in for range-driven trading session and markets may have to look at technical factors as key drivers for today.'' A major currency in focus was the yen after Japanese economic data issued Tuesday failed to dispel doubts that the Bank of Japan would raise interest rates next month for the first time since July.

Against the yen, the dollar rose to 119.00 yen, the highest since Oct. 26, according to electronic trading platform EBS.

The dollar then pared its gains to 118.93 yen JPY=>, 0.1 percent up on the day.

The Japanese currency also fell to a one-year low against the New Zealand dollar.

The latest Japanese economic reports kept investors thinking that the BOJ may not see enough data to justify a rate increase before its two-day policy meeting on Jan. 17-18, traders said.

The yen was undermined by data Tuesday showing Japan's core consumer price index rising 0.2 percent in November from a year earlier, in line with market expectations, and all-households spending falling 0.7 percent in November, smaller than the expected decline of 1.3 percent ''Japanese numbers continue to underwhelm and while there does appear to be a modest upward trend in recovery figures these are so minor that one modest negative factor could stall the process,'' said Ian Copsey, senior financial analyst at Globla Forex Trading in Tokyo.

''CPI appears to reflect energy prices rather than coming from domestic price pressures, consumer spending while better then expected is hardly anything to write home about. Potential is there but actual results are still standing on shaky foundations.'' In other currencies, the euro was flat against the dollar at $1.3134 EUR=> early in New York. The dollar was also little changed against the Swiss franc at 1.2201 francs CHF=>.

Sterling, meanwhile, fell nearly 1.0 percent against the dollar to $1.9560 GBP=>, as technical signals suggest the currency had been overbought and a retracement was in order.

The high-yielding New Zealand dollar rose to 83.62 yen NZDJPY=>, its highest level since last December, but has come back down to 82.42 yen REUTERS PKS HS2021