NEW YORK (CNN/Money) - Bond prices fell further Wednesday, pushing the yield on the benchmark 10-year note to its highest level in six months, as traders weighed more signs from the Fed that it would keep raising short-term interest rates to fight inflation.

The dollar fell against the euro and yen.

The yield on the benchmark 10-year Treasury note rose as high as 4.45 percent but eased later in the session. The 10-year bond lost 13/32 of a point to 98-13/32 to yield 4.44 percent, up from 4.39 percent late Tuesday. The 30-year bond tumbled a whole point to 110-16/32 to yield 4.66 percent, up from 4.59 in the previous session. Bond prices and yields move in opposite directions.

In shorter-dated debt, the five-year note declined 6/32 of a point to yield 4.31 percent, while the two-year note lost one tick to yield 4.23 percent.

Treasury prices fell across the board Wednesday, with longer-dated debt taking the biggest hit as investors moved out of long-range paper.

On a day with no major economic reports, traders focused on the Fed, which has signaled the need for more interest rate hikes in order to fight inflation. Inflation hurts bonds because it erodes the value of the fixed-interest paying investment,

Fed Governor Mark Olson said Wednesday he would watch price pressures closely in coming months to see if soaring energy prices are raising inflation risks.

Olson, who was the only Fed official to vote against a rate hike at the Fed's last policy meeting, said in remarks he prepared to deliver at the Fraser Institute in Vancouver: "These [energy] price increases will put upward pressure on the cost of the producers of other items, thereby posing the risk of some impetus to core inflation."

Fed Governor Donald Kohn also voiced concern about inflation Wednesday. While taking audience questions during a speech at the College of Wooster, Kohn said underlying inflation, which doesn't include often volatile food and energy prices, had been "pretty well behaved" but that the Fed had been raising rates to maintain that status quo.

"Inflation will still rise if central banks allow economies to run 'too hot' -- beyond sustainable potential -- and such a pickup could become self-perpetuating if it became embedded in inflation expectations," he said.

Minutes from the Fed's Sept. 20 meeting, which became available Tuesday afternoon, further cemented expectations that the Fed would keep to its measured pace of rate hikes through the end of this year and possibly into next. The Fed is scheduled to meet two more times before the year ends.

The minutes showed that the nation's central bank policymakers believed more rate hikes would be needed to fight inflation in the aftermath of Hurricane Katrina.

In currency trading, the dollar peaked at a fresh 17-month high against the yen, but gave back those early gains.

The euro bought $1.2027, up from $1.1994 late Tuesday, while the dollar bought ¥114.37, down from ¥114.50 the previous session.

-- from staff and wire reports

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