The euro strengthened against the dollar Friday after European Central Bank President Jean-Claude Trichet sent a strong signal that the bank may lift rates in December. The euro rose to $1.1774, up from $1.1741 earlier Friday before Trichet's remarks. The dollar traded at 118.92 yen, down from 119.25 in early trade. Trichet said the ECB's governing council is ready to raise rates moderately in December, noting risks to price stability. The ECB has held its benchmark official rate steady at 2% since June 2003. "The euro, not surprisingly, has led the dollar lower against the major European currencies in the aftermath of Trichet's rate hike comments," said Action Economics. Prior to Trichet's remarks, the euro was weakened by news that producer prices in Germany, Europe's largest economy, saw their largest increase in six months in October, as energy costs rose, according to Boris Schlossberg, senior currency analyst at Forex Capital Markets. A 30% increase in oil costs this year is fueling German inflation, Schlossberg said. Earlier the Bank of Japan, as expected, held to its monetary policy by a 7-2 vote. The governor of the bank, Toshihiko Fukui, insisted there was no rift between the government and the central bank on when its easing policy should end. But analysts from UBS also noted media reports that in Japan, where core CPI only excludes food prices and not energy prices, the government is considering also stripping out energy prices from core CPI. "If the reports are accurate, then the adjustment to the CPI comes at an extremely convenient time for the government, which has been pressuring the BOJ not to move too quickly in normalizing monetary policy even if CPI turns positive," the bank said. "The changes could thus bolster market suspicions that the BOJ will be unable to operate monetary policy independent of the government's fiscal situation, to the detriment of the yen," the bank said. There are no U.S. economic reports Friday to lend direction to trade. The dollar was nudged from two-year highs Thursday after mostly weaker U.S. economic data inspired traders to cash in some of the greenback's lengthy run.