By Ian Chua
SYDNEY (Reuters) - The dollar held at its highest in nearly two months against a basket of major currencies early on Friday, on track for a third week of gains as investors awaken to the risk of a hike in U.S. interest rates as early as next month.
New York Federal Reserve President William Dudley on Thursday said the U.S. economy could be strong enough to warrant a rate increase in June or July.
His comments reinforced surprisingly clear signals of a possibly imminent rate hike in minutes of the Federal Reserve's April policy meeting and underpinned an already firm greenback.
The dollar index <.DXY> last stood at 95.293, having been as high as 95.502 - a level last seen on March 29. It was up 0.7 percent this week and has risen 2.4 percent in the past three weeks.
"The market is currently ascribing around a 60 percent chance that the U.S. Fed will hike rates by the July meeting, and NAB has pencilled-in a July rate hike," said Tapas Strickland, economist at National Australia Bank.
"Fed officials are seemingly content with such a pricing," he said, adding an earlier June move could be complicated by the Brexit referendum which occurs a week after the June 14-15 Fed review.
Against the yen, the greenback reached a three-week high of 110.39 > but dipped back below 110.00 as weakness on Wall Street shored up the safe-haven Japanese currency.
The euro also eased against the yen to 123.19 >, though it remained tightly range-bound since bouncing off a three-year trough of 121.48 early this month.
On the dollar, the common currency hovered around $1.1200 >, having touched its lowest in over seven weeks at $1.1180.
A standout performer was sterling, which rose broadly after a robust UK retail sales report diminished chances of an interest rate cut that some investors were factoring in.
The pound reached a two-week high of $1.4663 > and was last at $1.4603. Its trade-weighted index peaked at 87.9 <=GBP>, its highest since Feb. 5.
In contrast, the embattled Australian dollar stood at $0.7228 > after briefly dipping below 72 U.S. cents for the first time since early March.
Traders will be hard-pressed to find any market-moving data out of Asia on Friday, a condition that could see the major currencies consolidate through the Asian session.
(Reporting by Ian Chua; Editing by Eric Meijer)
