FOREX-Dollar gains against yen, steady against euro on Fed bets

(Updates prices, adds comments; changes byline, dateline, pvs LONDON)

* Dollar gains vs yen, hits 110.45 yen

* Euro hovers near Tuesday's roughly 10-week low of $1.1129

* Dollar slips vs Canadian dollar after Bank of Canada decision

By Sam Forgione

NEW YORK, May 25 (Reuters) - The U.S (Other OTC: UBGXF - news) . dollar rose against the yen for a second straight day and hovered near its highest level in roughly 10 weeks against the euro on Wednesday on expectations for a Federal Reserve rate hike in the near term.

The dollar was last up 0.31 percent against the yen at 110.32 yen, near a session high of 110.45 yen, as traders continued to anticipate a potential June or July Fed rate increase. The euro was last mostly flat against the dollar after dipping slightly to match Tuesday's roughly 10-week low of $1.1129.

Fed funds futures contracts implied traders expected a 38 percent chance of a rate hike in June, up from a 34 percent chance on Tuesday, according to CME Group (Kuala Lumpur: 7018.KL - news) 's FedWatch program.

Investors' expectations for a Fed rate hike have risen since last week's minutes from the central bank's April meeting signaled a June increase was firmly on the table, while hawkish remarks from Fed officials this week and some stronger U.S. economic data also ratcheted up bets.

Traders were awaiting comments from Fed Chair Janet Yellen on Friday. Rate increases are expected to boost the dollar by driving investment flows into the United States.

"Investors have started to seriously contemplate the prospect of a hike at the start of the summer," said Luke Bartholomew, global macro investment manager at Aberdeen in London.

Greece's debt relief was perceived as a positive for the euro, said Sebastien Galy, currency strategist at Deutsche Bank (LSE: 0H7D.L - news) in New York. The Eurogroup ministers gave a nod to releasing 10.3 billion euros ($11.48 billion) in new funds for Greece in recognition of painful fiscal reforms pushed through by Prime Minister Alexis Tsipras' leftist-led coalition.

The dollar hit a six-day low against the Canadian dollar of C$1.3052 after the Bank of Canada kept interest rates on hold on Wednesday. The bank said the economy would shrink in the second quarter as a result of damage from recent wildfires in Alberta before rebounding later in the year.

The dollar index, which measures the greenback against a basket of six major currencies, was flat at 95.585, near a more than eight-week high of 95.661 hit earlier.

The dollar was last mostly flat against the Swiss franc at 0.9926 franc, not far from a nearly 11-week high of 0.9940 franc touched earlier. (Reporting by Sam Forgione; Additional reporting by Anirban Nag in London; Editing by Nick Zieminski)