* Dollar struggles to gain against the yen
* Euro hits 1-month high vs dollar, pulls back
* Australian dollar hits two-year high vs U.S. dollar
(Adds comment, adds details, updates prices)
NEW YORK, Sept 17 (Reuters) - The dollar gained against the euro and but fell against the yen on Friday as poor U.S. consumer sentiment data eased risk appetite against the backdrop of possible currency intervention by the Bank of Japan.
The euro vacillated in a range of more than a cent against the dollar on the final trading day of the week amid fears about the Irish banking sector, though an Irish Finance Ministry spokesman said there was no truth to rumours Ireland would need help to deal with its finances. [ID:nWLA3214].
After Japan intervened in the market to sell yen for the first time in six years on Wednesday, traders said caution about further intervention lent support to the dollar if it fell near 85.00 yen. However, having failed to breach 86.00 yen it was down on the day.
"I'd expect increased volatility in euro/dollar as there is still a lot of uncertainty about these re-emerging European debt problems," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto. "We'll probably see more of this where there are rumors in the market about specific countries, but even if they're denied, in the bigger picture, the market is going to remain concerned about peripheral European debt issues."
The euro moved between gains and losses against the dollar
before moving lower as U.S. consumer sentiment unexpectedly
worsened in September to its weakest level in more than a year.
[ID:nN17137976]. It last traded down 0.1 percent at $1.3058
The euro briefly recovered when an International Monetary Fund spokesperson said the IMF did not think financial assistance would be needed for Ireland. [ID:nWEN9970]
The euro was also pressured as the premium investors demand to hold Irish 10-year government bonds rather than benchmark German Bunds rose to a euro lifetime ahead of next week's supply and concerns about the banking sector. [GVD/EUR].
"The rumors about Ireland have had a massive impact in euro and euro/Swiss in the last couple of hours," said Boris Schlossberg, director for currency research at GFT Forex in New York. "It underscores the fragility of the debt situation in Europe."
Against the yen, the euro
The euro fell 0.9 percent against the Swiss franc to 1.3162
francs
BOJ WATCH
Even as the dollar fell 0.1 percent against the yen to
85.72 yen
"We haven't seen anything on Japan since they came in last Wednesday, but we may see action again on any dip below 85 yen in the dollar," said Brian Dolan, chief currency strategist at Forex.com.
Japanese Prime Minister Naoto Kan and U.S. President Barack Obama are due to meet on Sept. 23 in New York and Japan's currency market intervention will be on the agenda, the Asahi newspaper said. [ID:nTOE68G006]
The dollar faced resistance at the one-month high seen on Thursday just under 86 yen. Further resistance lies at 86.30, the bottom of the resistance cloud on its Ichimoku chart, but traders also cited stop-loss buy orders above 86.00 and 86.35.
Bank of Japan data show Wednesday's intervention may have totaled around 1.80 trillion yen ($20.98 billion) [ID:nTKW007123].
The dollar value represents around 4 percent of the daily average market turnover in dollar/yen using the last available data from the Bank of International Settlements.
Elsewhere, the Australian dollar hit a two-year high
The dollar index <.DXY> plumbed a five-week low.
(Reporting by Nick Olivari, additional reporting Steven C Johnson, Vivianne Rodrigues and Gertrude Chavez-Dreyfuss in New York, Editing by Chizu Nomiyama)