* Yen hits highest since early March
* Euro ticks higher as dollar weakens
* Focus turning to Fed meeting next week
* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
LONDON, March 16 (Reuters) - The dollar fell further against the Japanese yen on Friday on reports of more turmoil in the Trump administration, while other markets were quiet as investors remained cautious.
Concerns that U.S. trade tariffs could hurt the global economy and personnel departures at the heart of the U.S. administration have rattled markets in recent days, pushing the dollar on to the back foot and leaving the yen as the main beneficiary.
Commerzbank said the yen was also boosted by domestic factors, particularly confusion about when and how the Bank of Japan could start to ease record levels of monetary stimulus as it tries to lift inflation. Analysts at the bank said the BoJ was "sounding indefinably hawkish."
"What matters for exchange rates are interest rates. If comes down to whether the BoJ (Bank of Japan) is going to increase the yield target. That would send a strong signal for the currency," Thu Lan Nguyen, a currency strategist at Commerzbank said.
She said international concerns around U.S. politics and trade tariffs provided an "extra argument" for yen bulls, given the currency tends to do well in times of market uncertainty.
The yen, which has strengthened from around 113 yen per dollar at the start of the year, rose as much as 0.7 percent to 105.60, its highest since March 7. The Japanese currency also advanced against the euro, with the single currency down 0.5 percent at 130.21 yen.
Following an overnight bounce, the dollar resumed its recent decline and fell 0.2 percent against a basket of currencies on concerns about the shake-up inside President Donald Trump's administration and as next week's Federal Reserve policy meeting comes into focus.
Trump has decided to replace his national security adviser, H.R. McMaster, the Washington Post reported on Thursday. The New York Times reported that U.S. Special Counsel Robert Mueller had issued a subpoena for documents, including some concerning Russia, related to Trump's businesses.
Earlier this week, the U.S. currency took a hit after Trump dismissed Secretary of State Rex Tillerson as investors grew increasingly nervous about the direction U.S. policy might now take following a series departures by key members of staff.
"The best explanation for the impact the ongoing personnel changes taking place in the White House is that the dollar stands to weaken as it gets easier for President Trump to pursue protectionist policies," said Daisuke Karakama, chief market economist at Mizuho Bank.
The euro ticked 0.2 percent higher to $1.2325, with traders pointing to greenback weakness given there was little in the way of data on Friday to drive the single currency.
Since the European Central Bank last week cautioned investors expecting a paring back of monetary stimulus any time soon, the euro has struggled to make much headway after a rally in January, with the dollar currently the main driving force for currency markets.
Across the week the euro is up 0.16 percent this year against the dollar, while so far in 2018 it is 2.7 percent ahead.
Sterling rose 0.3 percent to as high as $1.3980, buoyed by media reports that Britain had made significant progress in its talks with the European Union to secure a transition deal. (Editing by Raissa Kasolowsky)