The U.S. dollar rose against the euro Friday and approached a near nine-month high against the Japanese yen after the U.S. Federal Reserve raised its key interest rate by another quarter percentage point. In early morning trading in Europe, the 12-country euro bought $1.2038, down from $1.2083 in New York late Thursday. The dollar remained strong against the Japanese currency, trading at 111.17 -- up from 110.95 yen late Thursday after the Bank of Japan's quarterly "tankan" survey that manufacturing conditions had improved for businesses. Its surge to an intraday high of 111.24 yen in Tokyo was the currency's highest level since Oct. 8 of last year. The British pound fell to $1.7735 from $1.7887 after the British economy grew just 0.4 percent during the first quarter, raising fears that the Bank of England may step in next week and cut interest rates from the 4.75 percent they've been at for nine months. In Washington, the Fed raised its federal funds rate by one-quarter percentage point to 3.25, which was widely expected. It was the ninth time the rate was increased. Analysts said it was likely the Fed would continue to bump up the rate this year to keep inflation under control. Some economists believe the federal funds rate could climb to as high as 4.25 percent by the end of this year. The European Central Bank, which has held interest rates at 2 percent for two years, meets next week, amid calls by some that it needs to lower the rate to spur growth in Europe.