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TOKYO, Oct 4 (Reuters) The dollar edged towards a 5-1/2-month high and the euro hit a one-month peak against the yen on Wednesday as investors used a jump in tensions over North Korea's nuclear ambitions as an excuse to sell the Japanese currency.

Pyongyang said on Tuesday that it would conduct its first nuclear test, prompting South Korea to heighten its security alert and the United States, France and Japan to urge the U.N.

Security Council to respond.

''North Korea's nuclear test talk was taken as an incentive to sell the yen as the yen remains under strong selling pressure on views that Japanese interest rates will stay very low,'' said a trader at a Japanese bank.

Overall, market players were cautious about making big bets ahead of a slew of speeches by Federal Reserve officials, including Chairman Ben Bernanke, as their comments could give clues about the Fed's thinking on the outlook for U.S. rates.

In early Tokyo trade, the dollar edged up to 118.05 yen from around 117.95 yen in late New York trade.

The dollar hit 118.39 yen on Monday, its highest since mid-April, after a surprisingly strong tankan survey of business sentiment failed to change the outlook for the Bank of Japan to raise rates only slowly.

The euro was at 150.30 yen after marking a one-month high around 150.45 yen -- in sight of the record high of 150.73 yen hit on electronic trading platform EBS at the end of August.

The single European currency was nearly flat at $1.2730.

The euro was supported as the market widely expects the European Central Bank to raise rates to 3.25 percent on Thursday.

Meanwhile, Australia's central bank kept rates unchanged as expected at 6 percent on Wednesday.

The Australian dollar gained slightly to $0.7435 following the rate announcement and after the currency fell to its lowest levels since mid-July on Tuesday on a fall in commodity prices.

Among upcoming U.S. central bank speakers, Kansas City Fed President Thomas Hoenig and Fed Vice Chairman Donald Kohn are slated to speak separately on the economic outlook.

New York Fed President Timothy Geithner will give a lecture entitled ''Progress Toward Financial Stability in Emerging Market Economies'', while Bernanke is due to speak on savings.

Reuters SBA VP0730