* Euro on track for best day in two weeks vs dollar * Rehn says Spain has taken effective action for 2012, 2013 * Japan PM Noda open to dissolving parliament on Friday By Wanfeng Zhou NEW YORK, Nov 14 The euro edged higher against the U.S. dollar on Wednesday, snapping a five-day losing streak, as worries about debt-laden Spain and Greece eased temporarily and after some Federal Reserve officials discussed the need for more bond buying. The yen fell the most against the dollar and euro in two months after Japanese Prime Minister Yoshihiko Noda said he was ready to dissolve the lower house of parliament this week and hold a snap election next month. European Union Economic and Monetary Affairs Commissioner Olli Rehn said Spain has taken effective action to address its budget deficits in 2012 and 2013, even though budget steps for 2014 fell short of expectations. His comments gave a further lift to the euro, which had pared losses on Tuesday after a German government source said Greece may receive aid worth roughly 44 billion euros ($55.93 billion) in a single tranche. "The better-than-expected news from policymakers in Europe pertaining to Germany's positive disposition to extending Greece additional fiscal flexibility has certainly helped a lot in terms of placating investors' angst," said Ravi Bharadwaj, pricing and market analyst at Western Union Business Solutions in Washington. The euro rose 0.3 percent to $1.2734, on track for its best day in two weeks. But sentiment on the currency was fragile, analysts said, as the International Monetary Fund and the euro zone remain at loggerheads over how Athens should bring its debt down to a sustainable level. The euro zone common currency briefly jumped to a session peak of $1.2777 after the minutes of the Federal Reserve's October meeting showed a number of Fed officials thought the U.S. central bank would need to step up asset purchases next year when the Fed's Operation Twist program expires. On Tuesday, the Fed's influential vice chair, Janet Yellen, said U.S. interest rates may need to stay near zero until early 2016 to boost employment forcefully. Against the yen, the euro rallied 1.3 percent to 102.14 yen . The dollar gained 1.1 percent to 80.30 yen. Japan's main opposition Liberal Democratic Party, which favors further monetary policy easing by the central bank, leads in opinion polls and the prospect of an early election is regarded as negative for the yen. LDP leader Shinzo Abe called on the central bank on Wednesday to print "unlimited yen" to achieve a new inflation target. Japanese Prime Minister Noda told parliament he would be willing to dissolve the lower house on Nov. 16 and hold elections in December if the opposition agreed to pass reforms to the electoral system. The prospect of further Fed easing could limit the dollar's gains. Earlier, data showed U.S. retail sales fell in October, while producer prices unexpectedly weakened last month. "This morning's economic reports paint a picture of a slow and struggling U.S. recovery that will require continued stimulus from the Federal Reserve," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York. Sterling hit a more than two-month low against the dollar at $1.5839 after the Bank of England's inflation report painted a gloomy outlook for the UK economy and governor Mervyn King said quantitative easing could still be restarted. The pound was last down 0.2 percent at $1.5841.