(Updates at 1910 GMT)

By Hannah Lang

NEW YORK, May 29 (Reuters) - The dollar rose on

Wednesday, boosted by higher U.S. bond yields ahead of key

inflation data later in the week, and strengthened against the

Japanese yen.

The dollar reached as high as 157.715 yen on

Wednesday, edging closer to levels that led to bouts of likely

intervention from Tokyo at the end of April and early May.

It was last at 157.665 yen, up 0.3% on the day.

"I think it's just going to continue to be a grind higher

for dollar/yen, all across yen pairs as well," said Brad

Bechtel, global head of FX at Jefferies. "It's basically

tiptoeing its way back towards that 160 level."

Slightly softer U.S. consumer price inflation data this

month weakened the dollar across the board. Since then, U.S.

Treasury yields have resumed their climb, with the benchmark

10-year yield at its highest in almost four weeks at 4.57%.

The main drivers were Tuesday's lackluster auction of two-

and five-year notes that raised doubts about demand and data

showing U.S. consumer confidence unexpectedly improved in May.

The U.S. dollar index was last up 0.43% at 105.11. The U.S.

core personal consumption expenditures (PCE) price index report

- the Federal Reserve's preferred measure of inflation - will be

released on Friday. Expectations are for it to hold steady on a

monthly basis.

Apart from the Japanese yen, most foreign currencies

have rallied against the U.S. dollar since mid-April, said Marc

Chandler, chief market strategist at Bannockburn Global Forex.

"I'm thinking that that move is over and we should look for a

dollar rebound."

The Aussie dollar was down 0.47% at $0.6618, even

after Australian consumer price inflation unexpectedly rose to a

five-month high in April, adding to risks that the next move in

local interest rates might be up.

Also in the mix for the yen was the carry trade, which

involves borrowing in a low-yielding currency to invest in

higher yielders.

"The yen remains under considerable downward pressure with

carry appetite elevated due to low FX volatility," Derek

Halpenny, head of research global markets EMEA at MUFG, said in

a note, citing elevated levels in euro/yen and sterling/yen.

The euro dropped to a near two-year low on the pound of

84.84 pence, driven by strong German regional inflation data.

It recovered after nationwide German data showed inflation

rose slightly more than expected to 2.8% in May, though that is

unlikely to change expectations for a European Central Bank rate

cut next month.

The common currency was last down 0.49% at $1.0804.

The pound weakened to $1.2702 a day after hitting a

two-month high.