* Downbeat U.S. economic data curbs speculation that Fed will hike soon
* Iraq tensions underpin traditionally safe-haven yen
* Sterling pushes to five-week highs after Carney tips higher rates
By Lisa Twaronite
TOKYO, June 13 (Reuters) - The dollar steadied in Asian trading on Friday but remained near two-week lows against the yen after tensions rose in Iraq and downbeat U.S. economic data gave investors no reason to believe the Federal Reserve will be raising interest rates anytime soon.
By contrast, the pound gained over a cent overnight to five-week highs after Bank of England Governor Mark Carney said on Thursday that British interest rates could rise sooner than financial markets expect. The pound was last up 0.1 percent to buy $1.6944.
Carney also said the central bank would carefully weigh the merits next week of tackling housing market risks, including an undesirable loosening in mortgage underwriting standards.
Expectations that the Bank of Japan will hold monetary policy steady on Friday also underpinned the Japanese currency. The BOJ might upgrade its view on overseas growth after the conclusion of the two-day meeting.
Governor Haruhiko Kuroda will speak after the meeting, and is expected to continue to stress that Japan is making progress toward meeting the BOJ’s target of 2 percent inflation during the fiscal year beginning in April 2015. His optimism on meeting the price target has led some investors to scale back bets of further monetary easing this year.
The Commerce Department said on Thursday that retail sales increased 0.3 percent in May, missing expectations for a 0.6 percent rise.
Separately, the Labor Department said initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 317,000 for the week ended June 7, exceeding expectations.
“These disappointing numbers drove the greenback lower and put pressure on Treasury yields and U.S. stocks,” Kathy Lien, managing director of FX strategy for BK Asset Management, said in a note to clients.
“Yet there was no major implication for Fed policy - if anything these reports reinforce the central bank’s commitment to taper slowly and their intention to leave monetary policy unchanged for a long stretch of time before raising rates,” she added.
The dollar was steady on the day at 101.72 yen, after dropping as low as 101.60 yen on Thursday, while the euro was also treading water at 137.85 yen.
The euro was flat from late U.S. levels against the greenback at $1.3550, but remained not far from a four-month low of $1.3503 set last week after the European Central Bank unveiled a package of easing measures, and became the first major central bank to charge financial institutions for parking their funds with it.
The yen’s traditional safe-haven status also gave it a lift, as tensions rose in Iraq. Sunni Islamist rebels surrounded the country’s largest refinery on Thursday and extended their advance south toward Baghdad.
U.S. weapons maker Lockheed Martin Corp said on Thursday that about two dozen of its employees were evacuating northern Iraq, and the U.S. State Department said other companies were also relocating their workers due to security concerns. (Editing by Shri Navaratnam)