TOKYO, Jan 12: The dollar hit a 13-month peak against the yen and a 1-1/2-month high versus the eur

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TOKYO, Jan 12: The dollar hit a 13-month peak against the yen and a 1-1/2-month high versus the euro on Friday as investors waited for U.S. data to help gauge the chances of a Federal Reserve interest rate cut later this year.

A string of solid U.S. economic data over the past week has boosted expectations that the Fed is in no hurry to lower the funds rate from 5.25 percent.

The euro fell against several currencies, including the dollar, in the previous session after European Central Bank President Jean-Claude Trichet failed to signal a February rate rise in comments made after a policy meeting.

The ECB left rates at 3.50 percent at the meeting on Thursday, as foreseen, but many analysts had expected a clear signal for a future rate rise.

In a Reuters poll taken after the meeting, the median forecast showed an 80 percent chance of a 25-basis-point rate hike in March.

For details, see Trichet's comments, in which he remained vague about the possibility of future rate hikes, also reinforced expectations that the dollar's yield advantage would not be eroded any time soon.

The dollar surged against the yen on Thursday, rising past the key 120-yen level to hit a 13-month high, despite the possibility that the Bank of Japan could raise the overnight call rate to 0.5 percent from 0.25 percent next week.

Investors believe a rate rise would not change the yen's position as the lowest-yielding currency among industrialised countries.

''The dollar's rally against the yen is unlikely to end soon as more investors believe the yield difference between the two will remain wide,'' said Nobuo Ibaraki, forex manager at Nomura Trust and Banking Co.

Investors will pore over the December retail sales report at 1330 GMT for more clues on the strength of the U.S. economy and the Fed's future policy path.

In early Asian trade, the euro dipped to a 1-1/2-month low against the dollar at $1.2877 from $1.2890 in late New York trade on Thursday, according to data from electronic trading platform EBS.

The dollar rose to 120.68 yen from near 120.50 yen, touching a 13-month peak.

Sterling was down around 0.1 percent to $1.9430 from $1.9450.

The pound rallied against major currencies the previous day as the Bank of England surprised the market with an increase in interest rates to 5.25 percent.

REUTERS

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