* Dollar index touches one-week highs

* Fed officials keep rate hike talk alive

* Japan investors sold net Y3.1 trln foreign bonds last week (Updates prices, adds comments)

By Ian Chua and Masayuki Kitano

SYDNEY/SINGAPORE, April 9 (Reuters) – The dollar touched a one-week high on Thursday, having enjoyed another leg up after two influential Federal Reserve officials kept alive expectations for a hike in interest rates sometime this year.

New York Fed President William Dudley and Fed Governor Jerome Powell on Wednesday sketched out scenarios in which the central bank could make an initial move earlier than many now expect and then proceed in a slow and gradual manner on further rate increases.

Yet, minutes of the Fed’s March meeting showed there was a wide divergence of views among policymakers, suggesting no consensus on the timing of a move.

“The final arbiter will be the data, recent data argued for delayed rate lift-off. A June 18 rate lift-off is now being priced as quite a slim chance,” said David de Garis, senior economist at NAB.

Still, the chance of a hike at all this year is a stark contrast to Europe and Japan where quantitative easing has years to run. So dollar bulls took heart and bid up the dollar index to a one-week high of 98.245, further away from Monday’s trough of 96.329. It last stood at 98.155.

Against the yen, the dollar rose 0.1 percent to 120.25 yen , having been as low as 119.65 yen on Wednesday.

“The (Fed) minutes revealed a split on timing but see through the noise and we are definitely set for a rate hike in H2 at some stage,” said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore.

That has given a broad lift to the dollar, Halley said, adding that the greenback will probably trade in a 120.10 yen to 120.50 yen during the Asian session and may then trade with a bias toward the top side in London.

One factor that has helped weigh on the yen in recent months is overseas investment by Japanese investors.

Weekly capital flows data on Thursday showed that Japanese investors bought a net 424.4 billion yen in foreign equities last week, their 20th straight week of such net purchases.

Japanese investors, however, sold a net 3.1 trillion yen ($ 25.8 billion) in foreign bonds, their biggest weekly net sales on data going back to 2005.

The weekly data contains no breakdowns by investor type and it is unclear how much of the net selling came from investors who invest in overseas bonds while taking currency risk.

Such net selling of foreign bonds may have occurred toward the end of Japan’s fiscal year at the end of March, to book profits in existing positions, said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore.

“On the face of it a modest positive for the yen, but we need to see whether or not this continues in the month of April… Typically April sees new foreign investments,” Henderson said.

The euro eased 0.1 percent to $ 1.0770, down more than 2 percent from this week’s peak of $ 1.1036 set on Monday.

In Europe, German industrial production figures will take centre stage, followed by an interest rate decision from the Bank of England (BoE).

A Reuters poll published last week found an increasing number of economists expect the BoE will sit tight on interest rates until next year, as it waits for Britain’s recovery to grow deeper roots and inflation to pick up.

($ 1 = 120.2300 yen) (Editing by Eric Meijer and Jacqueline Wong)