The dollar hit a two-year high against the euro on Friday, a day after investors brushed aside data showing a record U.S. trade gap in September and powered the U.S. currency to new peaks. The yen edged up from near a two-year low against the dollar following a report showing Japan's economy grew slightly more than expected in the third quarter, posting 1.7 percent growth annualized compared with forecasts for 1.2 percent. The data were the latest to show that consumer spending was helping Japan post a sustained recovery from a decade of stagnation and nearly eight years of deflation, but the optimistic economic outlook has done little to help the yen. Instead the dollar has run rampant to new highs and prompted more funds to shift cash into the U.S. currency, particularly against the euro. An all-time high U.S. monthly deficit of $66.1 billion in September, much bigger than forecasts, did nothing to stop the dollar's tear through technical barriers and added fuel to this year's rally, driven by a widening U.S. interest rate advantage. With European Central Bank officials giving mixed signals on whether they will tighten policy in the near term, investors have flocked to the dollar's 4 percent -- and likely rising -- overnight rate. That compares with static rates of 2 percent in the euro zone and near zero in Japan. The dollar's latest run higher was ignited last Friday after bursting above its previous peak for the year against the single currency around $1.1870 per euro, followed by its 2004 high near $1.1760. Tohru Sasaki, chief forex strategist at JPMorgan Chase in Tokyo, said the dollar's rise to new highs after the trade figures and before a long U.S. weekend suggested more long-term investors had a need to shift into dollars. "This means there are many people who have to buy the dollar," Sasaki said. "It's safe to say the demand will continue for a while." In midday Tokyo trade, the euro changed hands around $1.1690 after tumbling as low as $1.1670 on electronic trading platform EBS, the weakest since November 2003. In just a week the euro has lost about 3 cents against the dollar, or 2.3 percent, taking its losses for the year to 14 percent.