* Euro steadies near $1.15 after Treasury yields fall from highs
* Sterling extends gains in Brexit deal optimism
* Norwegian crown the big riser after inflation data
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh (Adds details, quotes, updates prices)
By Tommy Wilkes
LONDON, Oct 10 (Reuters) - The euro steadied on Wednesday near $1.15, moving away from seven-week lows after a fall in U.S. Treasury yields took some steam out of the dollar's recent run.
Rising Treasury yields and concern about the sustainability of Italy's public finances have fuelled another rally in the dollar in recent sessions, sending the greenback to a 1 1/2-month high on Tuesday.
That rally paused in European trading on Wednesday, although analysts said it was likely to prove a temporary reprieve for the euro.
Investors are betting that rising inflation pressures will keep the Federal Reserve, which unlike the European Central Bank is hiking rates, firmly focused on tighter policy, even as U.S. President Donald Trump took aim at policy makers' hawkish inclinations.
"If U.S. yields rise at the same time and the market prices in a slightly more aggressive Fed next year, that automatically means that EUR/USD will head south," Commerzbank analyst Antje Praefcke said.
"That means that short-term the dollar will continue to remain bid. The euro has lost its shine and therefore has too little to offer at present."
On Wednesday, the dollar index was largely unchanged at 95.713, not far off 96.163 reached during the previous session -- its highest level since Aug. 20.
The euro hovered around $1.1497 having briefly pushed past $1.15 in Asian trading hours.
Yields on Italy's 10-year bonds have hit a 4 1/2-year high this week - reflecting concern about the country's finances.
Italian Economy Minister Giovanni Tria reiterated on Wednesday that the government would do everything in its power to regain the confidence of financial markets.
European shares fell with investors in a nervous mood. Markets have been buffeted by worries about the impact of the U.S.-China trade conflict on economic growth, and rising U.S. funding costs.
"A short-term risk rebound should be faded and used to get back into JPY longs as rising bond yields will sooner or later collide with the outlook for risky assets," Morgan Stanley analysts said in a note.
The Japanese yen is traditionally viewed as a safe-haven currency but has performed badly versus the U.S. currency recently and remains near 11-month lows.
Against the yen, the dollar edged higher, trading up 0.2 percent at 113.20 yen.
With risk sentiment souring, currencies deemed a play on the global economy underperformed. The Australian dollar was stuck at $0.7106, not far from its weakest since February 2016.
Sterling hit a 3 1/2-month high versus the euro after reports that Britain and the EU were making progress towards a Brexit deal.
Yields on the benchmark 10-year Treasury bond stood at 3.22 percent on Wednesday, after reaching a seven-year top of 3.261 percent overnight.
China's offshore yuan gave up 0.2 percent to 6.9274 yuan per dollar, not far from the 6.9379 two-month lows touched at the start of this week.
A Reuters poll released Wednesday showed China's onshore yuan is forecast to pare some of its recent losses against the dollar over the coming year on hopes that risks from the U.S.-China trade war and a sell-off in emerging markets will subside.
The Norwegian crown gained 0.7 percent against the dollar to 8.2130 crowns, and 0.6 percent versus the euro to 9.4435 crowns, after Norway's inflation rate rose more than expected in September. (Editing by Angus MacSwan)