LONDON, June 12: The dollar traded near five-week highs against the euro on Monday after a leading US Federal Reserve official voiced concerns about inflation in the United States.

The euro fell to $1.2584 in late European trading from $1.2640 late on Friday in New York.

The dollar climbed to 114.23 yen from 113.97 yen on Friday.

Sandra Pianalto, president of the Federal Reserve Bank of Cleveland and one of eight Fed officials that decide the level of US interest rates, said in a speech that the current inflation picture, if sustained, exceeded her “comfort level”.

That and other comments reinforced expectations that the US central bank would lift its key Fed Funds rate another quarter point to 5.25 per cent at its rate-setting meeting on June 29.

“There was hawkish-ness and there was dovish-ness (in the speech) though more of the focus has been on the hawkish side,” commented Steve Barrow, currency strategist at Bear Stearns.

“The dollar looks reasonably OK for the moment as the market prices in the probability of a rate hike,” he added.

Financial markets have moved to price in another interest rate hike from the Fed over the last couple of weeks as inflation in the US remained stubbornly high.

The core consumer price index, Pianalto noted, has increased at an annualised rate of more than 3 per cent during the past three months.

Markets are now on inflation watch, and will be closely monitoring Tuesday's US producer price index release and Wednesday's consumer price index data.

More speeches were planned, meanwhile by Fed officials Mark Olsen and Susan Schmidt Bies on Monday along with another on Tuesday by Fed chief Ben Bernanke.

“The main focus will be US inflation numbers for clues about what is happening on inflation in light of recent Fed comments,” said Neil Mackinnon, chief economist at ECU Group.

The euro was changing hands at $1.2584 against 1.2640 on Friday, 143.76 yen (144.11), 0.6826 pounds (0.6867) and 1.5538 Swiss francs (1.5562).

The dollar stood at 114.23 yen (113.97) and 1.2345 Swiss francs (1.2309). The pound was being traded at $1.8483 (1.8403).—AFP