FOREX-Dollar gains on yen as traders eye yield differentials
* Fed's Dudley and Powell play down worries of stimulus tapering
Quarter-end adjusting seen helping lift euro
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, June 28 (Reuters) - The dollar scaled a two-and-a-half week peak against the yen in Asia on Friday but lost ground against the euro after two more Federal Reserve officials sought to play down fears over the central bank's plan to gradually reduce stimulus.
Traders said some last minute positioning ahead of the end of the month and quarter helped the euro edge off a four-month trough, although the common currency was still headed for its second week of declines.
"U.S. bond yields have come off a little bit in the last couple of days, but I think the environment we're in is still dollar-positive," said Mitul Kotecha, the global head of foreign-exchange strategy at Credit Agricole in Hong Kong.
Yield differentials are still favouring the dollar, compared to the yen in particular, he said.
Japanese economic data on Friday signalled steady economic growth, but economists believe it may take more time to achieve sustained rises in prices even as the government's expansionary policies are making some progress towards ending years of entrenched deflation.
Japan's consumer prices stopped falling in May and labour demand reached its strongest level in five years, but the BOJ's two-year time frame for achieving its 2 percent inflation target still appears overly ambitious
Against the yen, the dollar advanced 0.4 percent to 98.74 after rising to 98.98 yen earlier, its highest since June 11.
The dollar index, which tracks the greenback's performance against a basket of major currencies, was steady from late U.S. levels at 82.874 , not far from Thursday's high of 83.171, a peak not seen since June 3. The index was on track for its second straight week of gains and its biggest two-week rally since November 2011.
The euro added 0.3 percent to $1.3065, pushing away from Wednesday's four-week trough around $1.2983.
Investors turned positive on the dollar since Fed Chairman Ben Bernanke last week laid out a roadmap for scaling back its asset-buying stimulus programme if the economy continued to improve.
The looming end of easy money sparked a selloff in equities, government bonds, emerging market assets and commodity currencies.
That prompted major central bank policy makers to voice their concerns this week. New York Fed President William Dudley and Fed Governor Jerome Powell were the latest to attempt to quell market nerves.
Dudley went as far as saying that recent market expectations for an earlier rate rise are "quite out of sync" with the statements and expectations of the policy-making Federal Open Market Committee. His comments helped fuel further gains on Wall Street.
Sterling took a knock overnight after downward revisions to GDP, and particularly business investment, bucked the recent trend of improving data. The pound was down 0.1 percent at $1.5264, well off the month peak of $1.5751.
Later Friday, markets await the Chicago PMI index, a barometer of Midwest business activity and the final reading of U.S. consumer sentiment for June.