Update to Asia afternoon

By Jiaxing Li

HONG KONG, May 13 (Reuters) - The dollar held near a one-week high on Wednesday as risk sentiment soured after a hot U.S. inflation reading sent Treasury yields higher, while oil stayed elevated on renewed uncertainties in the Middle East.

The euro stood at $1.1735 EUR= and sterling traded at $1.3533 GBP=D3, both down roughly 0.05% against the greenback.

The risk-sensitive Australian dollar was 0.1% weaker at $0.72335 AUD=D3 and the New Zealand dollar traded down 0.2% at $0.5939 NZD=D3.

The U.S. dollar index =USD, which tracks the greenback against a basket of six major currencies, was steady at 98.325 - near the strongest level in a week.

"I think it's a less positive risk tone, effectively," said Ray Attrill, head of FX strategy at National Australia Bank. "The failure of equity markets to continue to push ahead, combined with higher yields, primarily in the wake of the CPI numbers, is a combination that has been a little bit of a floor under the dollar for the time being."

The U.S. consumer price index rose 3.8% in the 12 months through April, the biggest year-on-year increase since May 2023, as the oil shock triggered by the U.S.-Israeli war on Iran pushed prices higher.

Yields on the U.S. two-year note US2YT=RR, which typically moves in step with Federal Reserve interest rate expectations, and the benchmark 10-year note US10YT=RR hovered near seven-week highs; they last traded at 3.9896% and 4.4629%, respectively.

Markets have largely priced out any chance of a rate cut from the Fed this year, while expectations for a hike of at least 25 basis points at the central bank's December meeting rose to 35%, according to CME's FedWatch Tool.

Meanwhile, oil prices stayed elevated, with Brent crude futures LCOc1 last trading near $107 a barrel.

Hopes for a peace deal in the Middle East dwindled after President Donald Trump said a ceasefire with Iran was "on life support" after Tehran rejected a U.S. proposal to end the war.

Trump on Tuesday said he does not think he will need Beijing's help to end the war with Iran ahead of his meeting with Chinese President Xi Jinping later this week.

Elsewhere, the Japanese yen JPY= was largely steady at 157.715 per dollar after a sudden move stronger on Tuesday stoked speculation of a "rate check" by authorities, which is often a precursor to a currency intervention.

U.S. Treasury Secretary Scott Bessent said the U.S. and Japan believe that excess volatility in the currency market is undesirable, comments that were seen as offering some support to Tokyo's recent round of intervention to prop up the yen.

China's yuan CNH= traded around 6.79 per dollar, near its strongest level since February 2023.