TOKYO, Aug 13 (Reuters) The yen edged up against the dollar on Monday as a squeeze in money markets

TOKYO, Aug 13 (Reuters) The yen edged up against the dollar on Monday as a squeeze in money markets from the spreading U.S.

subprime mortgage distress prompted investors to trim risky positions such as carry trades.

The yen gave up some gains on Friday after surging to a four-month high against the euro as major central banks pumped in about $150 billion in overnight funds for a second straight day to relieve the tight conditions in money markets.

Investors are keeping an eye out to see whether money markets start to function more normally and equity and corporate bond markets settle down from the sharp volatility of the past few weeks on the spreading jitters about big bank and fund losses.

Markets remained rocky, with Japan's Nikkei share average erasing an early dip to rise 0.4 percent as safe-haven Japanese government bonds slipped.

''The moves by central banks have only calmed down markets intraday. The central banks cannot ease the concerns over subprime loans,'' said Masafumi Yamamoto, a currency economist at Nikko Citigroup.

Yamamoto said the dollar and other currencies were at risk of a deeper pull-back against the yen as long as the fears about credit markets linger.

The yen has rebounded across the board as investors have cut short positions in the low-yielding Japanese currency, which has been widely used by speculators as a cheap source of funds to buy higher-yielding currencies in the carry trade.

But even the dollar has edged up from a 15-year low against a basket of currencies struck a week ago as market players have trimmed some of the hefty short positions in the U.S. currency.

The dollar slipped slightly to 118.30 yen from near 118.40 yen in late U.S. trade on Friday, holding off the four-month low of 117.19 yen hit on electronic trading platform EBS last week.

The euro was little changed near 162.00 yen having crawled back from a four-month low of 159.98 yen hit on Friday.

The single currency was little changed near $1.3700 holding off the all-time high of $1.3853 reached in July.

The market had little reaction to data showing Japan's economy expanded at a 0.1 percent pace in the second quarter from the previous quarter, slightly below expectations. A slowdown was widely expected after two quarters of robust growth.

Investors see less chance of the Bank of Japan raising rates to 0.75 percent this month from 0.5 percent as the financial market volatility has flared up.

Swap contracts on the overnight call rate show just a 35 percent chance of a BOJ rate hike this month, down from as high as 75 percent last Thursday.

REUTERS KK SBA RAI0655