TOKYO, Jan 24 The dollar hovered in sight of a 14-year low against sterling on Wednesday

TOKYO, Jan 24 (Reuters) The dollar hovered in sight of a 14-year low against sterling on Wednesday after falling against European currencies in the previous session as central bank comments pointed to further interest rate rises in Europe.

But the dollar was faring better against the yen, holding near a four-year high against the low-yielding Japanese currency, which has fallen to record lows against the euro and 14-year lows against sterling this week.

Comments by Bank of Japan Governor Toshihiko Fukui in an interview with Reuters did little to dispel doubts about whether the central bank would raise rates in February and were unlikely to deter further yen selling, market players said.

Fukui told Reuters in an interview on Tuesday that higher rates could ultimately benefit the Japanese economy but the BOJ would rather err on the side of caution as long as data is mixed.

''You can sense that he wants to raise interest rates at an early stage, but in the end that didn't happen at the January meeting,'' said Kengo Suzuki, a currency strategist at Shinko Securities. ''The comments reconfirmed the difficulties of managing (monetary) policy.'' Suzuki added that Fukui's latest comments failed to remove uncertainty about the outlook for monetary policy.

The dollar stood at 121.69 yen as of 0024 GMT, little changed from around 121.65 yen in late U.S. trading on Tuesday and near a four-year high of 121.80 yen hit earlier this week.

Sterling stood at $1.9826 down from a 14-year peak of $1.9917 hit on Tuesday.

Expectations for further credit-tightening in Britain increased after remarks by Bank of England Governor Mervyn King on Tuesday, who said risks to British inflation and growth have shifted to the upside.

The euro was little changed compared with late New York levels and stood at $1.3026 Against the yen, the euro rose to record highs around 158.55 yen early on Wednesday.

Investors have dumped the low-yielding yen in favour of higher-yielding currencies after the Bank of Japan last week kept interest rates unchanged at 0.25 percent.

The decision to stand pat raised doubts about whether the central bank had given in to political pressure and has left investors questioning whether the central bank will raise interest rates in February.

REUTERS PDS RN0732