* Tokyo CPI accelerates in sign of widening Iran war price

pressures

* Dollar sags as US data, Fed comments spur paring of

rate-hike bets

* Yen remains in intervention danger zone at weaker than 160

per dollar

(Updates throughout)

By Dhara Ranasinghe and Gregor Stuart Hunter

LONDON, June 26 (Reuters) - The dollar was a touch softer

against other major currencies on Friday as fresh economic data

and Federal Reserve comments led markets to pare rate-hike bets,

allowing the yen - trading in an intervention danger zone - to

find firmer ground.

The greenback was still poised to end the week higher and

remains on track for its best month since July 2025, with gains

of almost 2.5%.

Thursday's data showing a key measure of U.S. inflation met

economists' expectations which tempered rate-hike bets. It is

expected to stall rather than derail the dollar's near-term

march higher.

"We have had a bit of profit taking, maybe because of

month-end but I think this move in the dollar could extend a bit

more," said Nick Kennedy, a currency strategist at Lloyds in

London.

"In aggregate, rate differentials are driving things again."

The dollar index, which measures the greenback's

strength against a basket of six currencies, was down 0.2% at

101.31. It remains within sight of more than one-year highs hit

earlier in the week.

The euro was 0.15% higher at $1.1385, while the

British pound was up 0.1% at $1.3201.

Interest rate expectations for major economies have returned

to the driving seat in global currency markets, with a strong

U.S. economy and hawkish signalling at the June Federal Reserve

press conference boosting the dollar.

U.S. money markets are fully pricing in a one quarter-point

rate hike by year-end.

Federal Reserve Bank of New York President John Williams

said on Thursday that while inflation pressures are likely to

moderate this year, they remain too high.

STILL IN THE DANGER ZONE

Japan's yen strengthened 0.1% against the dollar to

161.62 yen per dollar, rising from a two-year trough of 161.95

on Thursday. Breaching the 161.96 mark would take it to its

weakest level since 1986.

The weaker side of 160 is considered by many in the market

as a line in the sand for Japanese officials.

Some banks accelerated their timeline for rate hikes from

the Bank of Japan after data showed on Friday that core

inflation in Tokyo accelerated in June, providing additional

support for the yen.

The data suggests "second-round effects from higher oil

prices are increasing, while Bank of Japan officials are

sounding more hawkish," analysts from ING wrote in a research

note.

"With core prices likely to accelerate going forward, we

have brought forward our BOJ rate-hike call to October from

December."

Elsewhere, the Australian dollar eased 0.3% to

$0.6895. Bitcoin was up almost 2% at $60,454, recovering

some losses after reaching its lowest since September 2024

earlier this week.