* Dollar strengthens broadly after Fed perceived less dovish * Euro underperforms dollar, support seen around $1.2974 * Euro rises versus Swiss franc ahead of SNB rate decision By Nia Williams LONDON, March 14 (Reuters) - The dollar hit an 11-month high against the yen and one-month high versus the euro on Wednesday and more gains were expected after an upgraded Federal Reserve economic outlook and firmer U.S. data dented the greenback's appeal as a funding currency. U.S. two-year Treasury yields reached a 7-1/2-month high after solid retail sales data on Tuesday, making the dollar less attractive to fund investments in higher-yielding assets. These factors pushed the dollar to a peak of 83.56 yen in European trade, its highest since mid-April. Traders said Japanese exporters were reluctant to sell the dollar and anticipated further strength. Last year's high of 85.53 yen was seen as important resistance. The euro struggled against the dollar, falling to a one-month low of $1.30308 on trading platform EBS as it triggered stop losses below support at $1.3054, the 50 percent retracement of a Jan. 16-Feb. 24 rally. It later recovered to $1.3066, down 0.1 percent for the day. Further support for the euro loomed at the next major trough on daily charts at the Feb. 16 low of $1.2974. "The dollar is profiting compared to the euro and the yen for the moment as the Fed has been a little less dovish," said David Bloom, head of FX research at HSBC. "I can understand why the dollar has momentum as the economy looks a bit better. The question is whether the market is over-reacting." A strong 1.1 percent rise in U.S. retail sales added to signs of a pick-up in the world's largest economy after an encouraging jobs report last week. Acknowledging this trend, the Fed slightly upgraded its outlook, expecting "moderate" growth over coming quarters and a gradual decline in the unemployment rate, although it said the jobless rate remained elevated. Recent monetary easing steps by the Bank of Japan and the country's record trading deficit powered by demand for fossil fuels have also helped the dollar, which has slightly more than 9 percent against the yen since the beginning of February. "We have revised our dollar/yen forecast up to 90 in six months and think it will stay there until 12 months from now," said Raghav Subbarao, currency strategist at Barclays Capital. Barclays' previous forecasts were for dollar/yen to be at 82 yen in six months and 84 yen in a year. The dollar index, which measures its value against a basket of six major currencies, hit its highest in nearly eight weeks at 80.435. 'INVERSE RELATIONSHIP' Further boosting sentiment, the Fed said most of the largest U.S. banks passed its stress tests, bolstering strong gains on most stock exchanges. The traditional inverse relationship between the dollar and equities looked to have broken down and some analysts said this could persist, in part due to the low starting point of expectations in early 2012 for U.S. growth and forward rates. Jens Nordvig, global head of FX strategy at Nomura, said the European Central Bank's long-term cash injections into European banks (LTRO) had also changed euro/dollar's trading dynamics. "In a way, the euro is the new dollar, with potential to become the favourite funding currency in global capital markets," he said. The single currency strengthened against the Swiss franc, however, rising to a one-month high of 1.2117 francs before a Swiss National Bank rate decision on Thursday. Although economists polled by Reuters expect the SNB to stick to its euro/Swiss floor at 1.20 francs and keep interest rates at zero, there have been calls for the bank to raise the floor. The Australian dollar also dropped against its U.S. counterpart, hitting a seven-week low of US$1.0465.