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FOREX-Dollar slides to 2-1/2 month low as Fed rate hike fears subside

 (Updates to U.S. afternoon trading)
    * Graphic: World FX rates tmsnrt.rs/2RBWI5E

    By Stephen Culp
    NEW YORK, May 18  (Reuters) - The dollar dipped on Tuesday
for the fourth straight session, reaching its lowest level
against a basket of currencies since late February on waning
fears that inflation spikes could prompt the Federal Reserve to
raise interest rates sooner than anticipated. 
    U.S. Treasury yields stalled as investors grew more
confident that the Fed will hold off on tightening its
accommodative monetary policy, despite worrisome indicators that
booming demand and scarce supply are sending prices soaring.

    Those price increases have stoked fears of longer-term
inflation, despite the central bank's assurances that the spikes
will be transitory.
    "The market has come around to the Fed's expectation that
inflation is set to rise over near term but will plateau and
decline in the coming months," said Joe Manimbo, senior market
analyst at Western Union Business Solutions in Washington.
    "The perception is the Fed could lag other central banks in
normalizing its policies."
    Several Fed policymakers are expected to speak this week and
the U.S. central bank is due to release the minutes from its
April policy meeting on Wednesday, all of which will be parsed
for any signs of a shift in its economic outlook.
    "As long as the Fed maintains this very dovish policy
stance, that's going to leave the dollar vulnerable," Manimbo
added. "Having said that, the Fed signaling a change in course
might not be that long in the offing if we see strong data,
especially in the job market and inflation."
   The dollar index was last down 0.48% at 89.747. 
   The progress of COVID-19 vaccine deployment and easing of
measures to contain the pandemic have lifted higher-risk
currencies that stand to benefit most from economic revival.
    For an interactive graphic on worldwide vaccine rollout and
access, click here here.
    The euro gained 0.63% to $1.223, passing its
highest level since Feb. 25, and the dollar fell 0.25% to 108.89
Japanese yen.
    The British pound, buoyed by the lifting of
COVID-19 restrictions, passed the $1.42 level for the first time
since Feb. 24.
    "It's a good day for the pound," Manimbo said. "The Bank of
England has upgraded outlook for the UK economy and the pound is
starting to bear the fruit of that. Britain's strong vaccine
rollout has pulled growth forward."
    Rising oil prices supported the Norwegian crown and
helped boost the Canadian dollar to a six-year high.

    Bitcoin dipped 1.9% to a more than three-month
low, extending its slide after Tesla Inc boss Elon Musk
dampened enthusiasm for the cryptocurrency over the weekend.

    Rival digital currency ether rose 2.48% to
$3,363.   
    
    ========================================================
    Currency bid prices at 3:24PM (1924 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change                   
                                              Session                                             
 Dollar index                 89.7370        90.1840     -0.48%         -0.271%       +90.2040    +89.6890
 Euro/Dollar                  $1.2228        $1.2152     +0.63%         +0.08%        +$1.2234    +$1.2153
 Dollar/Yen                   108.8900       109.1750    -0.25%         +5.43%        +109.2750   +108.8550
 Euro/Yen                     133.14         132.73      +0.31%         +4.90%        +133.1600   +132.7000
 Dollar/Swiss                 0.8966         0.9033      -0.73%         +1.35%        +0.9035     +0.8961
 Sterling/Dollar              $1.4191        $1.4139     +0.38%         +3.88%        +$1.4220    +$1.4135
 Dollar/Canadian              1.2053         1.2068      -0.11%         -5.33%        +1.2081     +1.2014
 Aussie/Dollar                $0.7803        $0.7770     +0.40%         +1.40%        +$0.7813    +$0.7765
 Euro/Swiss                   1.0964         1.0974      -0.09%         +1.45%        +1.0982     +1.0952
 Euro/Sterling                0.8615         0.8593      +0.26%         -3.60%        +0.8619     +0.8582
 NZ                           $0.7252        $0.7216     +0.50%         +0.99%        +$0.7271    +$0.7211
 Dollar/Dollar                                                                                    
 Dollar/Norway                8.2065         8.2570      -0.49%         -4.31%        +8.2580     +8.1795
 Euro/Norway                  10.0363        10.0345     +0.02%         -4.11%        +10.0530    +10.0019
 Dollar/Sweden                8.2757         8.3285      -0.03%         +0.97%        +8.3434     +8.2743
 Euro/Sweden                  10.1195        10.1225     -0.03%         +0.43%        +10.1486    +10.1155
 
    
 (Reporting by Stephen Culp;
Additional reporting by Ritvik Carvalho; Editing by Dan Grebler)
  
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