* Rebound in U.S. debt yields supports dollar, euro hits 2-wk low
* Profit-taking chips away at Aussie's big gains
* Kiwi extends losses following decline in milk prices
* Loonie's fall slows but seen vulnerable ahead of trade data (Adds details, quotes)
By Shinichi Saoshiro
TOKYO, Aug 5 (Reuters) - The dollar extended gains against the yen and euro on Wednesday after Atlanta Federal Reserve President Dennis Lockhart expressed support for an interest rate hike in September.
The dollar nudged up 0.1 percent to 124.46 yen JPY= after pulling away from an overnight low of 123.80. The euro slid to a two-week low of $1.0847 EUR= .
Lockhart, a voter this year on the Federal Open Market Committee, told the Wall Street Journal that it would take "significant deterioration" in the U.S. economy for him to not support a rate hike in September. ID:nL1N10F25P
"Lockhart was not scheduled to speak until Monday (10 Aug), so the hawkishness of the comments, and the timing of the interview is surprising," wrote Richard Cochinos, head of Americas G10 FX strategy at Citi in New York.
After three days of sharp declines, U.S. Treasury yields jumped on Lockhart's comments and supported the dollar.
The dollar index .DXY rose as high as 98.218, highest since late April.
While the Atlanta Fed president's views strengthened the case for some dollar bulls, the odds of a September hike are still seen hinging on Friday's U.S. non-farm payrolls data.
Reflecting market caution, the fed funds rate - which enables investors to bet on when rates will rise - still indicates that a hike is unlikely in September.
The Australian dollar saw profit takers chip away at some of its big gains made Tuesday after the Reserve Bank of Australia toned down its call for a weaker currency.
The Australian dollar dipped 0.2 percent to $0.7370 AUD=D4 after surging 1.3 percent overnight, when it managed to reach a two-week high of $0.7428.
"There is little reason to buy commodity currencies like the Aussie right now, and its gains were fuelled mostly by short covering," said Junichi Ishikawa, market analyst at IG Securities in Tokyo.
"The only short-term lift the Aussie, kiwi and the Canadian dollar could receive are from participants shifting around their positions ahead of Friday's U.S. jobs data," he said.
The New Zealand dollar inched down as well, on track for its sixth straight day of losses.
The kiwi was down 0.1 percent at $0.6531 NZD=D4 after a fall in international milk prices and edged closer to a six-year trough of $0.6498 plumbed mid-July. ID:nL3N10F5G5
The dairy sector generates more than 7 percent of New Zealand's gross domestic product and its price swings impact the kiwi.
The Canadian dollar's descent slowed somewhat after crude oil prices rose from multi-month lows.
Canada's loonie, a commodity currency hit hard by declining oil prices, still appeared vulnerable with upcoming indicators seen painting a grim picture of the Canadian economy.
Canadian trade data due out on Wednesday is expected to show a deficit of C$2.8 billion in June. ECONCA
The Canadian dollar last fetched C$1.3192 CAD=D4 after falling to an 11-year trough of C$1.3213.