FOREX -Dollar surge cools, eyes on Yellen, inflation

* Dollar index hovers below recent 2-week high

* For the week, dollar index up more than 2 pct

* BOJ keeps policy unchanged, as expected (Adds quotes, updates prices)

By Patrick Graham

LONDON, May 22 (Reuters) - The dollar fell on Friday but remained on course for its first week of gains since the start of April ahead of inflation numbers that may add to concerns over the pace of U.S. economic growth.

A 4-cent gain at the start of this week restored faith in the dollar's year-long rally, following a month of falls. But its immediate future continues to depend on data on the world's biggest economy improving after a disappointing few months.

The Philly Fed survey of sentiment on Thursday prompted some profit-taking by those who bought the dollar earlier in the week. Dealers said there was speculation from some funds of a lower than forecast reading on inflation.

"Today's CPI (Other OTC: CPICQ - news) figures might go slightly in the wrong direction," analysts from U.S. bank Brown Brothers Harriman said. "The consensus expects the year-over-year headline pace to ease to -0.2 percent from -0.1 percent and the core rate to 1.7 percent from 1.8 percent."

The yen was roughly flat on the day after a BOJ meeting gave a slightly more upbeat view of the economy that gave no sign it was ready to do yet more to support growth.

The dollar traded half a percent lower against the euro at 1.1163. Against a basket of currencies it was just 0.2 percent off at 95.040.

"The U.S. CPI today might provide some daily noise but in general I think we're heading into a more rangebound environment," said Alvin Tan, a strategist with French bank Societe Generale (Paris: FR0000130809 - news) in London.

"The speech later today by (Federal Reserve President) Janet Yellen might be interesting. But really the Fed is in waiting mode, we think they will raise rates in September but they are unlikely to make that decision in the next month or two."

In Europe, Germany's often market-moving Ifo data prodded the euro marginally higher, while there was little sign at an EU summit of the breakthrough in talks on Greece.

European Central Bank chief Mario Draghi warned in a speech that future economic growth would be modest.

The dollar index is up 2 percent on the week, putting it on track for its first weekly gain in six. Analysts said the index's inability to break above its 100-day moving average, currently around 95.620, was keeping a lid on the dollar.

The dollar was down 0.2 percent at 120.82 yen, compared with around 120.90/95 just ahead of the BOJ announcement. For the week it is up more than 1 percent against the yen.

"I think there is a sense that it might be better to buy (the dollar) since the downside was solidly supported and it looks as if it is starting to break higher on charts," said a trader for one Japanese bank in Tokyo.

"But it's not as if an immediate rise to 125 yen seems likely," he said. (Additional reporting by Masayuki Kitano in SINGAPORE and Anirban Nag in LONDON; Editing by Alison Williams)