LONDON, July 12 (Reuters) - The pound coursed towards its best two-week performance against the dollar in eight months on Friday, after data pointed to an improvement in UK growth, while the U.S. economy shows signs of fatigue.

Action in the foreign exchange market in the last 24 hours has been dominated by the yen, which rose by the most since early May on Thursday after the Bank of Japan likely intervened to prop it up, just as the dollar weakened following a softer U.S. inflation report.

The pound dropped by over 1% against the yen on Thursday, as the Japanese currency strengthened broadly. It was last up 0.3% at 205.65 yen, near its highest since early 2008.

Sterling has gained 2.4% against the dollar in the last two weeks, its biggest two-weekly rise since November last year. It was last up 0.3% at $1.2949, making it one of the best performing major currencies of the day.

Data on Thursday showed the UK economy grew more quickly than expected in May, which prompted traders to chop back their bets on an August rate cut from the Bank of England.

BoE Chief Economist Huw Pill gave the pound an extra boost this week by saying services inflation and wage growth showed "uncomfortable strength" despite headline inflation falling to the BoE's 2% target in May, and it was unlikely that June inflation figures due next week would change the big picture.

"Our August BoE rate cut call, already very close, is in doubt, with the market pricing 50%," Bank of America strategists said in a note.

The futures market attaches a 52% chance of an August cut from the BoE and an 88% chance of a September one.

A week ago, those chances were at 61% and 92%.

"Interest rate differentials are a key fundamental driver of currencies, and right now they are supportive of the pound. The real interest rate in the UK is 3.25%, this compares with 2.5% for the U.S.," XTB research director Kathleen Brooks said.

"The larger real interest rate in the UK versus the U.S. is driving the pound right now, and it may only get larger."

(Reporting by Amanda Cooper; Editing by Barbara Lewis)