(New throughout after European opening, changes dateline from previous TOKYO/SYDNEY)
* Dollar index on track for second weekly loss on trot
* U.S. consumer spending data tepid, suggest slower recovery
* New Zealand dollar hits three-year highs, eyes post-float peak
By Patrick Graham
LONDON, June 27 (Reuters) - The dollar looked set for a second week of losses on Friday, reduced to more than one-month low against the yen after a string of poor U.S. economic data that gave investors no reason to expect higher interest rates soon.
In Europe, the first sight of German inflation data was likely to emphasise the outlook for a prolonged period of easier monetary policy, though that has done little to dampen the euro's strength so far in 2014.
The New Zealand dollar hovered at its highest in nearly three years as investors sought out higher-yielding currencies.
The dollar's failure to launch - it is a grand total of 0.04 percent weaker since January against a basket of currencies - has been one of this year's dominant trends on major currency markets, defying a raft of forecasts it would soar higher.
That may yet happen, but it will require the numbers on the U.S. economy to improve substantially. Latest consumer spending data on Thursday fell short of expectations, and came close on the heels of this week's steep downward revision to first-quarter growth.
"I have been sticking with the view that the dollar should sooner or later be led higher by U.S. yields and I don't think I'm alone in that, but it just doesn't want to go this week," said a senior dealer with one London-based bank.
Against the yen, the dollar slipped about 0.3 percent to 101.38 yen after falling as low as 101.315 yen, its lowest since May 21, as U.S. yields scraped the bottom of their recent range.
Wednesday's revision prompted some analysts to cut their forecasts for U.S. growth, but there were also those raising forecasts for the second quarter and predicting that an improvement for the dollar was only a matter of time.
Neil Mellor, a strategist with Bank of New York Mellon in London, pointed to sentiment and other more current data that had been more positive in the run-up to the GDP revision.
"It tells you a lot about the market's inclination that people are focusing on backward- rather than forward-looking numbers," he said.
"The Federal Reserve will clearly use any sign of weakness as an excuse to maintain the status quo (on rates) and the market wants to use the dollar as a funding currency, hence favouring the yield plays like the kiwi, sterling and others."
The dollar index edged down 0.05 percent to 80.175, not far from a one-month low of 80.075 struck earlier in the day. Against the euro, it was almost unchanged at $1.3615.
While a lot of market attention has focussed on sterling and the prospect of higher UK interest rates at the end of this year or the beginning of next, New Zealand policymakers have already been raising rates for months.
The RBNZ's cash rate is currently at 3.25 percent, among the highest in the developed world and the kiwi has become a beacon to yield-seeking investors in response, quietly assembling an almost 7-percent gain since the start of this year.
It traded at $0.8773 on Friday, having peaked at $0.8795, just half a cent off the 2011 high of $0.8842. That is the strongest the currency has been since it was floated in 1985.
Sterling also stood within striking distance of a near six-year peak, having gained ground after Bank of England steps announced on Thursday to cool Britain's housing market did not derail expectations of higher rates.
The pound was broadly unchanged, trading at $1.7025 , off a peak of $1.7064 set on June 19. (Editing by Catherine Evans)