(Changes first paragraph to read "near a three week high")
* 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
By Dion Rabouin
NEW YORK, July 14 (Reuters) - The dollar rose to near a three-week high against the yen on Thursday, 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.
The Japanese currency fell near 106 yen per dollar and past 140 yen per pound, 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. jetted higher against the GBPJPY= yen, the GBP= dollar and the euro GBPEUR= after the Bank of England decision.
"In terms of the big theme, we're seeing a little bit of confidence in the overall market," said Scott Smith, senior corporate FX trader and market analyst at Cambridge Global Payments.
"It's all about waiting for the incoming data to really determine how central banks are going to react (but) there's still a feeling that the Bank of England, Bank of Japan and to some extent the Federal Reserve are willing to make monetary policy more accommodative should they need to."
The dollar was supported 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, was flat at 96.239 after falling following the BOE decision.
The New Zealand dollar NZD= fell more than 1 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.