Inflation picking up...more interest rates rises on the...

Inflation picking up...more interest rates rises on the cards....

Dollar hits 8-mth low vs yen, U.S. inflation looms

LONDON, May 17 - The dollar hit an 8-month low against the yen and weakened against the euro on Wednesday, on worries about global imbalances and the U.S. inflation outlook.

The yen reached new levels after European Central Bank Governing Council member Christian Noyer told Reuters in the previous session that more currency flexibility was desirable in Asia, echoing a call made by Group of Seven powers last month for Asian currencies to rise.

A weak reading in the U.S. consumer price index for April, due at 1230 GMT, is expected to reinforce market expectations that the Federal Reserve will not raise interest rates in June after tightening credit at 16 consecutive policy meetings.

"The dollar downtrend is intact," said Armin Mekelburg, currency strategist at Hypovereinsbank in Munich.

"For today, the headline CPI figure could jump to the upside, while core inflation may decline a little bit."

Economists in a Reuters poll expect the CPI data to show consumer prices rising 0.5 percent in April, and core prices edging up 0.2 percent, after rising 0.4 percent and 0.3 percent respectively in March.

By 1150 GMT, the dollar was down slightly at 109.31 yen, briefly hitting its lowest level since September 2005 at 108.99 after Japanese Finance Minister Sadakazu Tanigaki said there was no change in Japan's stance on foreign exchange.

The euro hit a 7-week low at 140.58 yen , before recovering to 140.81.

The euro was up slightly at $1.2888 , within a cent of one-year highs set on Monday.