* BoE surprises market by holding fire on post-referendum rate cut
* Yen falls on speculation BOJ will fund public spending directly
* Dollar flat after strong PPI, jobless claims data
* Kiwi also hit by speculation of early rate cut (Updates to close of U.S. trading, adds quote)
By Dion Rabouin
NEW YORK, July 14 (Reuters) - The dollar rose to near a three-week high against the yen on Thursday and fell near a two-week low against sterling, as a surprise decision from the Bank of England and expectations of stimulus from the Bank of Japan returned risk appetite to markets.
The Bank of England announced it would not provide additional stimulus while signaling it stood ready to do so next month. That combined with anticipation that the Japanese government could launch a 10 trillion yen fiscal stimulus program to coincide with further easing from the BOJ boosted sentiment toward riskier assets.
The yen sank across the board as the upbeat mood on global stock markets stretched into a sixth day and media reports stoked speculation the Bank of Japan could take steps to fund government spending directly.
"Certainly the markets like to see global central bank friendliness, whether that be holding rates steady or pushing rates further downward," said Tony Bedikian, managing director of global markets at Citizens Bank. "At the moment, albeit the Bank of England kept rates steady and that was a surprise, their next move is not expected to be a tightening, it's expected to be an easing."
Sterling jetted higher against the GBPJPY= yen and the euro GBPEUR= after the Bank of England decision. It rose to a session high of $1.3470 against the dollar GBP= .
The yen slid past 105 yen per dollar JPY= and 140 yen per pound GBPJPY= , with dealers citing a Bloomberg report saying ex-Federal Reserve chief Ben Bernanke had raised the prospect of the BoJ issuing perpetual bonds.
An adviser to Japanese Prime Minister Shinzo Abe poured cold water on the idea in an interview with Reuters published after the Bloomberg story and government sources later outright denied they were being considered. dollar's losses were limited by a strong U.S. producer price index and better-than-expected initial jobless claims data that showed inflation and solid job growth may be returning to the American economy. dollar index .DXY , which tracks the dollar against six major currency rivals, fell 0.15 percent to 96.074 as it pared early gains against the yen while the pound and euro held their rises following the BOE decision.
The euro EUR= rose 0.3 percent against the dollar to $1.1122.
The New Zealand dollar NZD= fell by 0.8 percent after central bankers there said they would issue an economic update before next month's policy meeting -- an unusual step read by some as a sign the Reserve Bank was preparing to cut rates.