NEW YORK - The dollar firmed against the euro Friday, bolstered by rising US inflation that stirred speculation the Federal Reserve will raise interest rates.

The euro was changing hands at 1.4673 dollars around 2100 GMT, down from 1.4708 dollars late Thursday.

However, the dollar slipped against the Japanese currency, falling to 108.75 yen from 109.47 yen.

The dollar was boosted by a Commerce Department report showing inflation rose to an annual 4.5 percent in July, the highest rate since February 1991.

Elevated inflation could encourage the Fed to raise its key base rate, analysts said. The central bank has held the federal funds rate at a low 2.0 percent for two straight policy sessions as it focuses on sluggish economic growth.

The dollar continued to benefit from Thursday's sharp upward revision of second-quarter gross domestic product (GDP) growth to a robust 3.3 percent from an initial estimate of 1.9 percent.

In contrast, other major economies, such as the eurozone, Britain and Japan, are struggling with weak growth amid year-old financial market turmoil.

"Recent economic data points towards a weakening of real GDP growth in the eurozone economy and a more accommodative monetary policy could be needed to prevent the region from falling into a recession," said Antonio Sousa at Forex Capital Markets.

Inflation data for the 15-nation eurozone came off record highs in August, offering a glimmer of light as the threat of recession looms.

Annual inflation in the eurozone countries fell to 3.8 percent from a record 4.0 percent in July as oil prices cooled, according to a first estimate from the Eurostat data agency.

The lower-than-expected eurozone inflation data suggested the European Central Bank would have to begin looking at interest rate cuts, even if it was unlikely to take any action in the near term.

"This ... supports our view that the ECB will eventually cut rates pretty aggressively, although worries over the inflation outlook will keep the bank on hold for some months yet," said Capital Economics analyst Jennifer McKeown.

The yen rallied against the dollar as inflation in Japan jumped to a decade high, reviving talk of a future interest rate hike there, dealers said.

"The inflation figure caused some yen-buying since it was quite high. The markets reacted naturally," said Kenichi Yumoto, vice president of forex sales at Societe Generale.

Japan's core inflation hit 2.4 percent in July as prices rose for the 10th straight month on the back of soaring energy and raw material costs, the sharpest increase since October 1997.

Dealers said the dollar also got some support from its safe-haven status as Washington and Moscow traded charges over Russia's intervention in Georgia.

In late New York trade, the dollar rose to 1.1007 Swiss francs from 1.0991 late Thursday.

The pound was at 1.8218 dollars, down from 1.8285.

- AFP /ls