The dollar hit a new two-year high against the yen and held onto hefty gains against the euro on Friday after comments from the Federal Reserve chief cemented expectations U.S. interest rates would climb even higher. The dollar extended its run of two-year peaks against the yen to a fifth day, bolstered after Fed Chairman Alan Greenspan said on Thursday that inflation risks were a worry. In contrast with the Fed, the Bank of Japan is expected to leave interest rates near zero until at least next year, fuelling outflows of domestic funds into higher-yielding overseas assets. The European Central Bank left interest rates unchanged at 2.0 percent on Thurdsay and gave no hint it would raise rates as early as December as some investors had bet. All these developments are giving a yield advantage to the dollar, which also rose against the Australian dollar and sterling. "The dollar is strong because the Fed is signalling further interest rate hikes and the market is pricing in more rate hikes next year," said Carsten Fritsch, currency strategist at Commerzbank in Frankfurt. "In contrast, the ECB was less hawkish yesterday and there is no clear timeframe as to when the BOJ would abandon its interest rate policy. So interest rate differentials are widening in favour of the dollar." The dollar had risen as high as 117.78 yen, bringing its gain since January to nearly 15 percent. At 1045 GMT it stood around 117.63, up 0.5 percent on the day. The euro was steady at $1.1940, having fallen around one percent on Thursday