* Traders price in 69% odds of a Fed rate increase in

September

* US 10-year Treasury yield rises 6.35 basis points to

4.727%, highest since January 2025

* BOJ leaves rates unchanged but signals resolve to push up

borrowing costs

(Updated in New York morning time)

By Karen Brettell

July 31 (Reuters) - Stocks were mixed on Friday, giving back

much of their earlier gains, while longer-dated Treasury yields

pushed to new multi-year highs, after several Federal Reserve

officials argued that further interest rate hikes are needed to

combat inflation.

Currency markets also stayed on alert for further

intervention, a day after Japanese authorities stepped in to

support the yen, according to a market source.

Three Fed policymakers who had dissented in favor of a rate

hike at this week's meeting made their case publicly on Friday

for higher rates. The Fed kept rates unchanged - a widely

expected outcome that aligned with market pricing, which had

priced in roughly a one-in-three chance of a hike.

Dallas Federal Reserve President Lorie Logan said on Friday

that without "modest action in the near term," the U.S. central

bank will not be able to get inflation back on track to its 2%

target, given a solid labor market that is strengthening and

upside risks to price pressures.

That echoed similar comments by Cleveland Fed President Beth

Hammack and Minneapolis Fed President Neel Kashkari.

The yield on benchmark U.S. 10-year notes rose

6.35 basis points to 4.727%, the highest since January 2025.

The 30-year bond yield rose 5.14 basis points to

5.2584%, the highest since mid-2007.

Traders are now pricing in 69% odds of a rate increase at

the Fed's September meeting.

Oil prices sharply on Friday as reports that some tankers

were forced to turn around in the Strait of Hormuz prompted

traders to reassess shipping flows through the key waterway.

Oil prices rose sharply in July, with Brent crude

headed for monthly gains for the first time since March.

"The shock absorbers in oil markets are dwindling fast, so a

failure to de-escalate would be materially costlier than

previous rounds of tension," wrote Teddy Bunzel, head of Lazard

Geopolitical Advisory at Lazard Asset Management.

Shipments through the crucial Strait of Hormuz remain

disrupted. The alternative route through the Bab el-Mandeb

Strait has also come under attack from the Iranian-backed

Houthis, further worsening the outlook.

STOCKS GIVE BACK EARLIER STRENGTH

Stocks had rallied earlier in the session after strong

earnings from Amazon ( AMZN ) and Microsoft ( MSFT ) eased investor jitters and

drew traders back into the AI trade, but hawkish Fed commentary

and rising yields eroded those gains.

Microsoft ( MSFT ) on Wednesday forecast strong cash

generation through fiscal 2027. Amazon ( AMZN ) followed a day

later with its strongest cloud growth in more than four years,

reassuring investors eager for proof that massive AI spending is

paying off.

"There's significant drawdowns over the course of the month

and everything related to artificial intelligence," said Art

Hogan, chief market strategist at B Riley Wealth.

"Now with the hyperscalers, in particular Amazon ( AMZN ), coming out

and talking about the amount of revenue and demand for their

cloud services, which in general is a lot of the small and

medium businesses, that's put a significant interest back into

the neo-cloud companies and their offerings as it pertains to

rollout of AI strategies."

The Dow Jones Industrial Average was last down 0.06%

at 52,179.23, the S&P 500 fell 0.02% to 7,435.72 and the

Nasdaq Composite rose 0.19% to 25,170.38.

The pan-European STOXX 600 index fell 0.03%, while

Europe's broad FTSEurofirst 300 index also dipped

0.03%.

South Korea's battered KOSPI leapt 17.91%, mounting

a record comeback after heavy losses earlier this week. The

tech-heavy bourse, still about 30% off its all-time high, has

become emblematic of the sharp swings in investor sentiment

towards AI-related stocks.

MSCI's gauge of stocks across the globe was

up 0.73% at 1,115.07.

BOJ HOLDS RATES DAY AFTER INTERVENTION

The yen strengthened 0.03% against the greenback to

159.49 per dollar, following sharp gains on Thursday after Japan

conducted yen-buying, dollar-selling intervention, according to

a market source. The U.S. Treasury has also told several banks

it may intervene in the yen market on Friday and that they

should "stand ready for future action," a source familiar with

the matter told Reuters.

The BOJ kept interest rates unchanged on Friday, but

signalled its resolve to push up borrowing costs.

At a press conference, BOJ Governor Kazuo Ueda said

inflation risks were skewed to the upside, and the central bank

was prepared to speed up the pace of rate hikes should monetary

conditions be accommodative.

Analysts note that intervention has had limited success in

providing durable support for the yen, and say the currency's

outlook is unlikely to improve unless the BOJ raises rates.

"The yen fundamentals and technicals are very poor.

Intervention is not a credible, long-term solution," said Lauren

van Biljon, senior portfolio manager, rates and FX, at Allspring

Global Investments.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

rose 0.21% to 100.28, with the euro down 0.36% at

$1.1485.

Spot gold fell 1.52% to $4,040.70 an ounce.