LONDON, Nov 17 (Reuters) - The U.S. dollar held comfortablyat 4-1/2 year highs versus the yen and tested the $1.12 levelsagainst the euro on Wednesday after robust U.S. data and hawkishcomments from Fed policymakers boosted expectations of a ratehike as early as mid-2022.
"The strong retail sales number yesterday did exactly whatit was meant to do and broke the U.S. dollar into fresh upsideground against a number of currencies in the continued beliefthat the curve of interest rate expectations is set to move infavour of higher rates sooner," said Jeremy Thomson-Cook, chiefeconomist at international business payments specialist EqualsMoney.
U.S. retail sales rose more than expected in October, areport showed on Tuesday, building on momentum from last weekwhen data showed consumer prices rising at the highest ratesince 1990.
The dollar index - which measures the currencyagainst six rivals - was 0.1% higher at 96.053 after earliertouching 95.884 for the first time since July last year.
The greenback rose as far as 114.975 yen , itshighest since March 2017 before retreating to 114.77 yen. Theeuro fell abruptly to $1.1263 for the first time sinceJuly 2020 and was last 0.2% lower at $1.1319.
Against the Swiss franc , the euro brieflyslipped to its lowest levels since May 2020.The dollar's rise has also pushed broader FX marketvolatility higher, with one gauge rising to a 8-month high ofnearly 7%.
Money markets are now pricing in a high probability of a Fedrate increase in June, followed by another in November. CME data suggest a 50% probability of a 25 bps ratehike by July 2022.
"The market assumes that the key rate will be hiked in thesecond half of next year," said Antje Praefcke, an FX strategistat Commerzbank. "For me too, the dollar remains a 'buy on dips'short-term."Elsewhere, the pound climbed to a one-week high versus thedollar and a 21-month high against the euro after Britishinflation reached a 10-year high in October, boostingexpectations of a rate hike as early as next month.
In cryptocurrencies, bitcoin traded just south of$60,000, after dipping below that level on Tuesday for the firsttime this month. It reached a record $69,000 last Wednesday.