TOKYO, Jan 11 The dollar held near six-week highs against the euro on Thursday as investo

TOKYO, Jan 11 (Reuters) The dollar held near six-week highs against the euro on Thursday as investors waited for clues from European Central Bank President Jean-Claude Trichet later in the day on when interest rates could next rise.

The U.S. currency climbed for a fifth session of the past six against an index of major currencies on Wednesday after data showing the country's trade deficit unexpectedly shrank to $58.2 billion in November, the smallest since July 2005.

The improvement in the trade gap suggested both that the United States' heavy dependence on foreign capital to cover its deficits may be waning slightly and that exports will give a boost to overall economic growth in the fourth quarter.

The good trade news, combined with receding expectations for the Federal Reserve to trim rates and thus the dollar's yield advantage this year, sparked gains in the battered U.S. currency.

The ECB is widely seen holding rates steady at 3.5 percent after the meeting, but many are looking for another rate increase in the first quarter, possibly as soon as next month. Trichet is set to hold a news conference at 1330 GMT.

''We believe that the most likely scenario is for the ECB to hike at its March meeting,'' currency strategists at Morgan Stanley said in a note to clients.

''However, Trichet's inclusion of the phrase the ECB 'monitors risks to price stability very closely' at last month's conference leaves the door open for a Feb hike,'' they said.

The Bank of England also is meeting on policy and is seen leaving rates steady at 5.0 percent.

The dollar slipped slightly to 119.55 yen from near 119.65 yen in late New York trade, with traders saying Japanese exporters and other market players have a big amount of orders to sell the U.S. currency lined up towards 120 yen.

The dollar rose as high as 119.88 yen last year and is approaching the 2005 peak at 121.40 yen, what was the highest for the U.S. currency since March 2003.

The euro was steady at $1.2945 after falling as low as $1.2931 in the previous session, its weakest since Nov. 23.

Against the yen, the single currency was little changed at 154.75 yen The yen has suffered from its low-yielding status even as investors see the odds tilted in favour of the Bank of Japan raising interest rates at a policy meeting next week to 0.5 percent, which would be the highest level since 1995.

The central bank's chief economist, Hideo Hayakawa, helped drive benchmark Japanese government bond yields to two-month highs during the previous session by saying consumer spending should pick up this year and fourth-quarter growth would be solid.

With the BOJ only lifting rates slowly from its previous policy of holding them at virtually zero, a wide range of market players have borrowed the low-yielding currency and used the funds to buy higher-yielding currencies and assets.

Reuters DKS VP0640