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(Updates prices)By Joice AlvesLONDON, Feb 24 (Reuters) – The dollar index rose to seven-week highs on Friday, as investors prepared for U.S. interest rates to stay higher for longer after a set of strong U.S. economic data.The yen fell after a volatile Asian trading session, with incoming Bank of Japan Governor Kazuo Ueda saying it was appropriate to keep ultra-loose monetary policy.Strong U.S. jobs data and rhetoric from Federal Reserve officials this month about openness to higher rates if needed in the fight against inflation have resulted in the dollar erasing its year-to-date losses.The dollar index – which measures the U.S. currency against six others – was 0.2% higher at 104.80, its highest since Jan. 6. It was set for a fourth-straight weekly gain, having risen 2.5% this month.”The dollar notching its fourth-consecutive week of gains highlights just how far the U-turn in the market narrative has gone as data this week continues to highlight strength in the U.S. economy and its underlying inflation drivers,” Simon Harvey, head of FX Analysis at Monex, said.This will likely be displayed yet again with January’s personal consumption expenditures price index – the Fed’s preferred inflation measure – due at 1330 GMT. But markets will likely wait for more Fed comments and February data for further rate hikes repricing, Harvey added.Investors expect U.S. rates to peak in July at 5.35% and remain above 5% until the end of the year, having walked back expectations of a deep rate cut this year.”We’re in a bit of a wait-and-see pattern in markets, with the dollar holding up firm and momentum largely driving minor moves in major currency pairs,” Harvey said.The euro edged 0.1% lower against the greenback at $1.0583, and sterling slipped 0.27% against the dollar to $1.1985.UEDA, JAPAN INFLATIONIncoming BOJ chief Ueda, who was nominated earlier this month in a surprise move, warned uncertainties regarding Japan’s economic recovery remained “very high”, which would warrant the BOJ maintaining its ultra-loose monetary policy.Story continuesThe yen was volatile, weakening 0.45% to 135.29 per dollar, after touching its highest since Monday in Asian trading hours.”His neutral comments, coming against market’s hawkish expectations and together with the rising global yields, suggest the yen could embark on a weakening trend again once we are past this volatility,” said Charu Chanana, market strategist at Saxo Markets in Singapore.Japan’s core consumer inflation hit a fresh 41-year high in January, putting renewed pressure on the central bank to phase out its massive stimulus programme.(Reporting by Joice Alves in London and Ankur Banerjee in Singapore; Editing by Sharon Singleton)

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