Array

LONDON, June 13 (Reuters) The dollar hit a one-month high against the euro and a six-week peak versus the yen on Tuesday after more Federal Reserve officials talked tough on fighting inflation, reinforcing expectations of a rate rise this month.

The U.S. currency was also boosted by a sell-off in equities, commodities and emerging markets as market players reinvested their money in the greenback.

Cleveland Fed President Sandra Pianalto said on Monday that current core consumer prices exceeded her ''comfort level'' if sustained, driving home the message that the Fed will keep raising rates if necessary to contain inflationary pressures.

Dallas Fed President Richard Fisher said the central bank was experiencing ''some angst'' over inflation.

These were the latest in a slew of Fed officials -- including chairman Ben Bernanke last week -- making clear their discomfort with current inflation levels, convincing investors that the Fed will lift rates for a 17th straight time to 5.25 percent at its meeting ending June 29.

''Bernanke's comments last week were the key ones on inflation, and ... it looks like they'll deliver (a rate hike), and that's dollar positive in the short term,'' said Geoff Kendrick, currency strategist at Westpac.

By 0739 GMT, the dollar was up around 0.1 percent on the day against the euro at $1.2569, just off a one-month high at $1.2558 hit earlier in the session.

The dollar also hit a six-week high against the yen at 114.77 yen. The euro was flat on the day at 143.92 yen.

INFLATION EYED Given the Fed's focus on inflation, investors will be looking to U.S. producer prices data for May at 1230 GMT, with core PPI expected to have risen 0.2 percent on the month.

Consumer prices data on Wednesday will also be key.

At 1500 GMT Bernanke gives a talk on consumer issues and will take questions from the audience, the second of three public events this week.

But the prospect of both higher U.S. short-term rates and a potential slowdown in the world's largest economy have rattled markets, sparking sell-offs in assets that prosper from strong global growth: stocks, commodities and emerging markets.

Gold prices slid below $600 for the first time in two months, the cost of copper hit a seven-week low and Japan's Nikkei share average had its biggest one-day percentage loss in two years, tumbling 4.14 percent.

''The weakness we are seeing in risky assets right now is slightly positive for the dollar across the board, including against the yen,'' said Adarsh Sinha, currency strategist at Barclays Capital.

The sell-off in commodities and in the Nikkei also sparked a fall in the Australian and New Zealand dollars, with both shedding nearly one percent on the day against the U.S.

currency.

EURO ZONE DATA In the euro zone, the German ZEW economic sentiment index is due at 0900 GMT and forecast to fall to 45.0 in June from 50.0.

Analysts said that a below-forecast reading could further dampen expectations for future European Central Bank rate rises.

The euro has been under pressure since the ECB last Thursday raised rates by 25 basis points to 2.75 percent -- less than some people had expected -- and signalled it was not planning to step up the pace of its current once-a-quarter monetary tightening.

Japanese traders brushed off news that in the late 1990s Bank of Japan Governor Toshihiko Fukui had contributed 10 million yen ($87,390) to fund manager Yoshiaki Murakami, who was arrested last week for insider trading.

One trader said that Fukui was unlikely to resign over the issue. However Sinha at Barclays said the news could have greater implications for markets in the medium term.

''The opposition is demanding his resignation and given that this could affect the credibility of Bank of Japan over the next month or so, it does seem very unlikely the BOJ is going to end zero interest rate policy in July,'' he said.

REUTERS VJ SND1431