* Dollar dips after Yellen sounds less hawkish than anticipated
* Canadian dollar near 13-month high after BOC's rate hike
* BOC seen to join number of c.banks challenging dollar strength (Adds details and quotes, updates prices)
By Shinichi Saoshiro
TOKYO, July 13 (Reuters) - The dollar dipped against its peers on Thursday after Federal Reserve Chair Janet Yellen did not sound as hawkish as many had anticipated, while the Canadian dollar stood near a 13-month high after its country's central bank hiked interest rates for the first time since 2010.
The U.S. economy is healthy enough for the Fed to raise rates and begin winding down its massive bond portfolio, though low inflation may leave the central bank with diminished leeway, Yellen said at her semiannual appearance before Congress on Wednesday.
The dollar slipped as Yellen's comments sparked a significant decline in U.S. Treasury yields.
The dollar index against a basket of major currencies was down 0.15 percent at 95.606 after retreating to as low as 95.511 the previous day, its weakest in 12 days.
"The overall assessment is that Yellen sounded dovish, but perhaps this was a result of her attempt to assuage too many concerns at once," said Bart Wakabayashi, branch manager for State Street Bank and Trust in Tokyo.
"Our data suggests that U.S. inflation is actually picking up again. The Fed appears to still be in a position to continue hiking rates."
Market attention turned to U.S. inflation data and its potential impact on Fed policy.
U.S. consumer price index (CPI) numbers are due on Friday and economists polled by Reuters expect the June core CPI figure to have risen 0.2 percent month-on-month, from a gain of 0.1 percent the previous month.
The greenback extended overnight losses and was 0.2 percent lower at 112.950 yen, pulled back from a four-month high near 114.495 scaled earlier in the week on expectations of U.S.-Japan monetary policy divergence.
"We could see the dollar begin to adjust lower against the yen. It has already made two failed attempts to break above 114.500, where a large line of offers stands," said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.
"Furthermore, as the confident-sounding Bank of Canada (BOC) demonstrated with its rate hike, the dollar's strength is challenged, faced with a number of central banks poised for monetary policy shifts, which also include the Bank of England and the European Central Bank."
The BOC raised interest rates for the first time in roughly seven years on Wednesday, saying the economy no longer needed as much stimulus.
The Canadian dollar, also boosted by a rise in crude oil prices, stood at C$1.2739 per dollar after rallying more than 1 percent to C$1.2681 overnight, its strongest since June 2016.
Other commodity linked currencies like the Australian dollar were also on the front foot. The Aussie, which has gained about 1 percent so far this week, advanced to a 13-day high of $0.7697 .
The euro edged up 0.2 percent to $1.1435, inching back towards a 14-month high of $1.1489 set on Wednesday. The common currency has gained steadily this month on speculation that the ECB would begin reversing its very easy monetary policy sooner rather than later. (Editing by Sam Holmes)