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Written by: Staff
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TOKYO, June 7 (Reuters) The dollar edged up against the euro on Wednesday, extending gains made after more Federal Reserve policy-makers warned of the risk of inflation, boosting chances U.S. interest rates will rise again later this month.

The U.S. currency gained across the board on Tuesday after St. Louis Fed chief William Poole was quoted by the Wall Street Journal as saying that a slowing economy on its own may not reduce inflationary pressures.

That echoed comments by Fed Chairman Ben Bernanke, who sparked a rebound in the dollar on Monday after he said the Fed needed to be vigilant to make sure inflation stays under control.

But the dollar steadied in Tokyo as traders took stock of the previous day's moves that had seen the currency rise nearly 1 percent against the yen and 0.5 percent versus the euro.

''Comments have got a short lifespan and this is what you are you seeing at the moment,'' said Luke Waddington, head of forex trading at Royal Bank of Scotland in Tokyo.

''People are taking a pause and taking a look at the reality of what figures are going to come out. Are these comments going to be backed up by an actual decision by the Fed?'' Amid seesawing forecasts, more people in the market expect the Fed to extend its campaign of 16 straight interest rate rises by lifting its overnight rate from 5 percent at its next meeting on June 28-29.

Traders said the euro was also weakened against the dollar after euro zone finance ministers made it clear on Tuesday that they didn't want the single currency to extend it's export-denting rally much beyond around $1.30.

In early Tokyo trade, the euro was at $1.2825 down from around $1.2835 in late U.S. trade on Tuesday.

The dollar dipped to 113.15 yen from around 113.30 yen.

In separate remarks on Tuesday, Fed Governor Susan Schmidt Bies said the central bank was trying to walk a tightrope between high inflation expectations and a slower growth outlook, adding it was hard to know how many more rate hikes would be needed.

Kansas City Fed President Thomas Hoenig said higher rates may take time to have an effect, paring the dollar's gains somewhat.

The euro was at 145.15 yen down from around 145.40 yen in late U.S. trade but in sight of a record high of 145.51.

Reuters SK VP0620

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