The dollar strengthened against the yen and weakened against the euro in Asian trading Wednesday, amid renewed uncertainty about the direction of U.S. interest rates.

The U.S. dollar bought 117.49 yen on the Tokyo foreign exchange market at 3 p.m. (0600 GMT) Wednesday, up 0.11 yen from late Tuesday in New York. The euro rose to US$1.2026 from US$1.2018.

The dollar stumbled in early trading, dipping as low as 117.35 yen as Japanese exporters converted overseas revenues back into their home currency. But the dollar drifted moderately higher later in the day.

The currency's meandering session reflected speculation by some traders that the U.S. Federal Reserve may not raise interest rates beyond 5.0 percent, following the overnight release of sluggish U.S. retail sales data. Higher interest rates tend to push up the local currency because it boosts returns from locally denominated investments, making them more attractive.

"There's a sense of uncertainty in the market about the outlook of both the U.S. economy and interest rates," said Hidenori Kato, who heads the spot foreign-exchange department at Societe Generale's Tokyo branch.

He said the dollar could fall as low as 113.00 yen in the coming weeks, especially as more Japanese companies repatriate earnings ahead of the March 31 end of the Japanese fiscal year.

The euro could rise to US$1.2300 over the same period, he said.

Investor sentiment toward the single currency has been improving amid signs oil-exporting companies in the Middle East are diversifying foreign-currency holdings into euros and amid expectations the European Central Bank will keep raising interest rates.

Traders will meanwhile be watching the U.S. Treasury Department's monthly international capital flows report, due for release Wednesday. They will be looking to see whether the U.S. is luring enough foreign investments to cover its large trade shortfalls.

"If the amount of capital flows into U.S. securities misses the market forecast for the second straight month, that could lead to further declines in the dollar given the current (market) conditions," said Tohru Sasaki, chief foreign-exchange strategist at JPMorgan Chase Bank in Tokyo.

The dollar was mostly lower against other Asian currencies, falling to 974.9 South Korean won from 977.1 the previous day, to 1.618 Singapore dollars from 1.6223, and to 39.120 Thai baht from 39.180