March 29, 2017 / 8:04 AM / 8 months ago

FOREX-Dollar pulls higher on Fed talk, sterling slips on Brexit anxiety

* Dollar index pulls away from 4-1/2-month lows

* Fed speakers remind markets of rate hike plans

* Sterling dips before Britain formally launches Brexit

* Graphic: World FX rates in 2017

By Ritvik Carvalho

LONDON, March 29 (Reuters) - The dollar pulled away from 4-1/2-month lows against a currency basket on Wednesday after solid data backed expectations for more U.S. interest rate hikes this year, while sterling was knocked by Britain triggering its exit from the European Union.

The dollar index, which tracks the greenback against six major rival currencies, rose to 99.911, up 0.2 percent. It managed to crawl off a low of 98.858 hit earlier this week, its weakest level since Nov. 11, in the wake of U.S. President Donald Trump’s failed healthcare reform bill.

Helping the greenback was data that showed U.S. consumer confidence index hit 125.6 in March, surpassing expectations for a reading of 114, and much higher than 116.1 in February. The March level marked the highest since December 2000.

The numbers also pushed up U.S. Treasury yields, further bolstering the dollar’s appeal. The yield on benchmark 10-year notes rose to 2.412 percent in Asian trading, from its U.S. close of 2.409 percent on Tuesday.

U.S. Federal Reserve Vice Chairman Stanley Fischer said in a television interview on Tuesday that two more increases to U.S. overnight interest rates this year seemed “about right”.

“(The dollar’s strength) is probably more a function of the very strong U.S. consumer confidence numbers we saw yesterday and the somewhat more hawkish noises we’ve seen emanating from the Fed,” said Alvin Tan, currency strategist at Societe Generale in London.

The Fed raised rates in March, and a majority of the central bank’s policymakers foresee at least two more increases this year.

But Fed Governor Jerome Powell said on Tuesday that the collapse of the healthcare reform bill had made the U.S. central bank’s job harder as it tried to anticipate which set of policies would pass.

Trump’s healthcare reform failure last week raised doubts about his ability to carry out his fiscal stimulus and tax cuts, and pressured the dollar to 110.11 yen on Monday, its lowest since Nov. 18. It has since recovered almost 1 percent and last stood at 111.15 yen, flat on the day.

“I think the optimism about ‘Trumponomics’, against the failure to pass the Obamacare reform bill, is still dominating the dollar/yen market,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

Sterling wallowed at one-week lows, 0.4 percent down on the day at $1.2395 as investors braced for British Prime Minister Theresa May’s move later on Wednesday to formally file paperwork to leave the European Union.

The euro was lower 0.3 percent on the day at $1.07835 .

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=

Reporting by Ritvik Carvalho; additional reporting by Tokyo markets team; Editing by Keith Weir

Our Standards:The Thomson Reuters Trust Principles.
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