* Dollar fights way above 86.00 yen but going proves tough
* Euro settles mid-range ahead of GDP data
* US inflation data seen as danger to dollar
By Masayuki Kitano
TOKYO, Aug 13 (Reuters) - The U.S. dollar fought its way higher on the yen on Friday following a report Japan's prime minister and the head of its central bank would meet to discuss ways to deal with the currency's export-sapping strength.
The dollar clawed its way to 86.12 yen, up 0.3 percent from late U.S. trading on Thursday, though traders reported tough resistance ahead of stops at 86.30/50.
The latest lurch higher came after the Asahi Shimbun reported Japanese Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa may meet as early as next week to discuss the yen's strength and possible responses.
A government source later confirmed that the government and the BOJ are coordinating to set up such a meeting.
Speculation has been intense that authorities would finally act on the yen given its strength was hitting stocks and exports. The BOJ confirmed it had checked forex rates on Thursday but emphasised it had no levels in mind.
In the wake of the yen's rise to a 15-year high against the dollar of 84.72 yen earlier this week on trading platform EBS, market players say the chances of yen-selling intervention at some point cannot be ruled out.
The focus now is on what kind of specific measures the government or the BOJ may come up with to curb yen strength.
Judging from what happened in late November to early December, there is a chance that any extra monetary easing steps that the Bank of Japan may be mulling could be unveiled before the possible meeting between Kan and Shirakawa, said Masafumi Yamamoto, chief FX strategist Japan for Barclays Capital.
"I think there will be a lot of disappointment if any monetary easing steps by the Bank of Japan are viewed as being ineffective," Yamamoto said.
"In that case, authorities may be forced to conduct actual currency intervention," he added.
Possible options for the BOJ may include steps such as trying to expand the amount of banks' current account balances parked at the BOJ, expanding the amount of its fixed-rate fund supply operation or extending the maturity, Yamamoto said.
The BOJ held an emergency meeting on Dec. 1 and unveiled a fixed rate fund supply operation, after the dollar fell below 85 yen in late November. That measure came ahead of a meeting between then-PM Yukio Hatoyama and Shirakawa.
Market players say Japanese authorities seem unlikely to intervene unless the dollar drops below 85.00 yen and gets closer to its record low of 79.75 yen hit in 1995, or the greenback's drop against the yen becomes more volatile.
Analysts say Japanese authorities do not seem eager to intervene.
"The Japanese authorities have no appetite for FX intervention," argued analysts at JPMorgan.
"Not only do they doubt the efficacy of intervention, but yen-selling would be difficult to justify, given strong G7 rhetoric against currency manipulation," they wrote in a note to clients. "It is politically unpopular given the magnitude of the losses on Japan's FX reserve."
The euro edged up 0.3 percent to $1.2866, with support lower down at its 100-day moving average at $1.2803.
Traders felt it could hold in a $1.2762/1.2897 area for now with the risk of a short-squeeze into euro zone growth data due later.
Data from the U.S. includes retail sales, consumer confidence and consumer prices (CPI) and markets fear disappointment.
Matthew Strauss, senior fixed income and currency strategist at RBC Capital Markets, cautioned that the CPI report could be more market-moving this time.
"With deflation talks dominating economic discussions and comparisons with Japan's lost decade now a common pastime, CPI data pose a major risk to USD tonight, maybe even more so than retail sales," he said. "It is difficult to see how a soft reading would not negatively impact the dollar." (Additional reporting by Wayne Cole and Reuters FX analyst Krisha Kumar in Sydney; Editing by Joseph Radford)