* Fed officials urge bank to begin stimulus withdrawal * Dollar rises to near 10-month highs * European shares edge back from 5-year highs By David Brett LONDON, May 16 (Reuters) - The dollar held firm near a 10-month high versus a basket of currencies on Friday and European shares fell after a regional Federal Reserve chief said the U.S. central bank may begin to taper its asset buying this summer. European shares were down 0.2 percent at 1,242.49, edging further back from five-year highs and following a retreat in Asian stocks and Thursday's late fall on Wall Street, but still on track for a weekly gain. "The stock market is driven by liquidity and sooner or later this must end," KBC senior economist Koen De Leus said. "In the near-term a correction would be healthy, but on the whole the market is (still) well supported by the huge amount of liquidity that is pumped into the system by the central banks." In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.4 percent to 479.33. The German Bund future slipped at the open as some investors booked profits after this week's gains, but expectations central bank policies will remain ultra-easy for months limited losses. The Bund future FGBLc1 was 4 ticks lower at 145.27 compared with 145.31 at Thursday's settlement, while the dollar rose 0.4 percent to 83.944 versus its currency basket, close to this week's 10-month high of 84.094. The Fed's quantitative easing programme has helped stabilise the world's largest economy and sent investors scrambling for returns, suppressing bond and cash yields, inflating asset prices and fuelling a global rally in stocks. San Francisco Federal Reserve Bank President John Williams said on Thursday the Fed could begin easing its monetary stimulus this summer and end bond buying late this year. Although Williams does not have a vote in the Fed's policy-setting panel this year, his comments weighed on U.S. shares, which have soared to record highs this year, in part because of the Fed's purchases of $85 billion a month in bonds. A trio of hawkish regional Federal Reserve officials meanwhile called for the U.S. central bank to stop buying mortgage-backed bonds, citing a recent improvement in the housing market. "The Fed realises the impact that (QE) has on markets and the potential negative impact on risky assets. Therefore they try to prepare the markets a bit for an eventual end," said BNP Paribas Fortis Global Markets head of research Philippe Gijsels.