* U.S. Producer prices unexpectedly rise
* Friday's CPI, retail sales data in focus
* Kiwi dollar leads gains vs greenback
* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh (Updates throughout)
NEW YORK, July 13 (Reuters) - The dollar was steady against a basket of major currencies on Thursday, as investors turned their attention to Friday's economic data, a day after Federal Reserve Chair Janet Yellen signaled the Fed's rate hikes could be gradual.
The dollar index, which tracks the greenback against six major rivals, was little changed on the day at 95.742 after earlier falling to 95.464, its lowest since October 2016.
Upbeat economic data helped steady the greenback. The number of Americans filing for unemployment benefits fell last week for the first time in a month and producer prices unexpectedly rose in June, likely keeping the Fed on track for a third rate increase this year.
The U.S. economy is healthy enough for the Fed to raise rates and start winding down its massive bond portfolio, but low inflation may leave the central bank with diminished leeway, Yellen said at her semiannual appearance before Congress on Wednesday.
"Yellen gave some hope to the dollar bulls with her acknowledgement of the improvements in the economy, but at the end of the day investors are still skeptical of what data is going to be like," said Kathy Lien, managing director at BK Asset Management in New York.
"That's why you have not seen much in the way of additional follow through in dollar demand."
Investors are focused on U.S. consumer price index and retail sales data, due on Friday, Lien said.
The dollar was 0.09 percent higher against the yen. The euro was little changed against the dollar after falling sharply on Wednesday.
"There is some speculation that the ECB is going to start hinting at reducing its stimulus and possibly ending its quantitative easing programme," said Sireen Harajli, FX strategist at Mizuho, citing news that European Central Bank President Mario Draghi may address the Jackson Hole central banking conference next month.
"I think that's been supportive for the euro."
Yellen's testimony boosted the appeal of the higher yielding currencies. The New Zealand dollar was up 0.83 percent on Thursday against the greenback and the Australian dollar gained 0.7 percent.
The Canadian dollar edged higher against its U.S. counterpart, a day after the Canadian central bank raised interest rates for the first time since 2010. Canada.
Sterling rose for a second straight day against the greenback and was up 0.46 percent to $1.2941.
(Reporting by Saqib Iqbal Ahmed; Editing by Meredith Mazzilli and Diane Craft)