FOREX-Dollar holds gains after Fed, Japan data

TOKYO, June 29 (Reuters) - The dollar held gains against the euro and yen on Friday a day after the Federal Reserve repeated worries about stubborn price pressures in its post-meeting statement.

The yen fell slightly after Japanese government data showed on Friday that consumer prices in the Tokyo area unexpectedly dipped 0.1 percent in June from a year earlier.

Japan's nationwide core CPI also slid 0.1 percent in May from a year earlier, in line with economists' consensus forecast, reinforcing expectations that the Bank of Japan will raise interest rates only gradually.

That view made speculators feel comfortable about borrowing the low-yielding Japanese currency to buy assets in currencies with higher interest rates.

"Market participants sold the yen on the slightly softer CPI data, although the data had no impact on the monetary policy outlook here," a trader at a Japanese trust bank said.

The market expects the BOJ to lift interest rates to 0.75 percent from the current 0.5 percent as early as August.

The dollar was supported after the Fed said on Thursday its main concern was that inflation might fail to moderate after it held interest rates steady at 5.25 percent, as expected.

"The Fed's statement cemented the market's view that the central bank will not move for a while," said Tsutomu Soma, a senior manger at Okasan Securities.

Some took the statement as a bit hawkish because the Fed did not express concerns about the U.S. housing market or the troubled subprime mortgage sector, while noting inflation pressure.

In a Reuters poll of primary dealers taken shortly after the release of the Fed statement, nine out of 17 expected the central bank to stay on hold at least through this year, and an equal number said the Fed's next move would be a rate cut. Five said the Fed's next move would be a rate hike. [ID:nNAT002879] The dollar rose 0.1 percent from late U.S. trading to 123.25 yen JPY=, moving towards a 4-1/2-year high of 124.14 yen hit earlier this month.

The euro was steady at 165.60 yen EURJPY=, staying below an all-time high of 166.94 yen hit last week.

The single European currency fell a tad to $1.3435 from $1.3450 in late New York trade EUR=.