* Dollar boosted by view Fed will raise rates in June
* Dollar eases vs yen, trades below recent eight-week high
* Focus on U.S. data, strength of economic growth momentum
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, May 12 (Reuters) - The dollar traded near a three-week high on Friday, on track for its strongest week this year, as robust producer price and labour market data bolstered expectations that the Federal Reserve will raise U.S. interest rates again in June.
A rally to 14-year highs for the dollar, inspired by the election of U.S. President Donald Trump, has fizzled out since the start of this year. The currency has fallen as much as 5 percent as the pro-growth measures Trump had promised have been called into question.
But despite a wobble earlier in the week after Trump’s abrupt firing of FBI Director James Comey - which was suspected to have been driven by political motives - the dollar was up around 1 percent for the week against its broad index, after reaching a three-week high on Thursday.
That, said analysts, was partly the result of a broad market focus shift away from politics and back towards monetary policy. With investors now pricing in an 80 percent chance of a Fed rate hike next month, while other central banks continue to ease policy, that could drive the dollar higher.
“Although the market now fully prices in a June hike, there’s way too little tightening priced thereafter, in our view,” said BNP Paribas currency strategist Sam Lynton-Brown, in London.
“Currency investors have flipped to a net short position in the dollar... We think that position is vulnerable to an unwind, as market focus shifts from politically driven risk-on or risk-off (sentiment) to monetary policy divergence.”
The euro, which hit a six-month high above $1.10 at the start of the week on relief that the centrist Emmanuel Macron had beaten the far-right Marine Le Pen to become French president, was trading flat at $1.0865, down 1.2 percent since Monday - its worst week in six.
Data released on Thursday showed new applications for U.S. jobless benefits unexpectedly fell last week while producer prices rebounded in April, pointing to a tightening labour market and rising inflation.
More U.S. indicators are due later on Friday, including retail sales and the consumer price index for April.
The dollar was flat at 113.81 yen, down from its eight-week high of 114.38 yen reached earlier in the week.
The dollar has gained more than 4 percent in the three weeks since the first round of the France’s presidential elections, with the yen slipping as risk aversion receded.
Yet some analysts say that despite expectations for a Fed rate increase, uncertainty about U.S. growth momentum and concern about the political implications of Trump’s dismissal of Comey could limit the scope for near-term gains for the dollar.
“The dollar will probably trade in a 112 yen to 115 yen range for a while,” said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo, adding that it will probably take some time for the greenback to break above 115 yen.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Additional reporting by Masayuki Kitano in Singapore, editing by Larry King)