* U.S. dollar index hits one-week high
* Wall Street gives back gains after Fed minutes
* Euro slips, sterling down on unemployment data
* U.S. Treasury 10-year yield hits four-year high (Updates Wall Street to close; updates throughout)
By Hilary Russ
NEW YORK, Feb 21 (Reuters) - The benchmark 10-year U.S. Treasury yield hit a four-year high, the dollar rose and stocks fell on Wednesday in a rocky session after the Federal Reserve at its latest policy meeting showed more confidence in the need to keep raising interest rates.
The Fed’s more upbeat take on inflation, as seen in the minutes of the Jan. 30-31 policy meeting released on Wednesday, will likely further cement expectations that new Fed chief Jerome Powell will lead his colleagues in raising rates next month.
“Members agreed that the strengthening in the near-term economic outlook increased the likelihood that a gradual upward trajectory of the federal funds rate would be appropriate,” the Fed said in the minutes.
Wall Street, which started the day positive, closed lower after bond yields surged.
In late trading, 10-year Treasury yields touched 2.957 percent, their highest level since January 2014. They were last at 2.95 percent.
The U.S. 30-year bond yield hit 3.233 percent, its highest level since July 2015, before tipping back to 3.228 percent.
The Fed minutes lined up with market expectations for future rate hikes, said Michael Skordeles, U.S. macro strategist at Suntrust Advisory Services in Atlanta.
“The market view is that we’ll see one in March, one in July and likely something later in the year, November or December,” he said. The minutes “reassured that there won’t really be a whole lot of change despite having a regime change.”
The minutes also showed that both the voting members of the Fed’s rate-setting committee and the wider group of policymakers had upgraded their forecasts for the economy since December.
The dollar index, which measures the greenback against a basket of six other major currencies, dipped following the release of the minutes but then recovered. The index was last up 0.4 percent at a one-week high.
The dollar has been weighed down this year by concerns that Washington might pursue a weak-dollar strategy, and by the perceived erosion of its yield advantage as other countries start to scale back their easy-money strategies.
Confidence in the dollar has also been shaken by mounting worries over the U.S. budget deficit.
But the greenback finally appeared to be benefiting from rising U.S. bond yields, especially as the Treasury Department issues more debt in anticipation of increased federal spending and a higher deficit from last year’s tax overhaul.
The euro edged 0.41 percent lower to $1.2286.
In Britain, an unexpected jump in the jobless rate weighed on the pound, helping to send sterling down 0.51 percent to $1.3924.
The Dow Jones Industrial Average fell 166.97 points, or 0.67 percent, to 24,797.78, the S&P 500 lost 14.93 points, or 0.55 percent, to 2,701.33 and the Nasdaq Composite dropped 16.08 points, or 0.22 percent, to 7,218.23.
MSCI’s gauge of stocks across the globe shed 0.17 percent.
The Toronto Stock Exchange S&P/TSX composite index , however, closed 0.55 percent higher, and the pan-European FTSEurofirst 300 index rose 0.11 percent.
Oil prices pared losses in post-settlement activity after data from the American Petroleum Institute showed a surprise draw in U.S. crude inventories. Traders had been expecting a rise.
U.S. crude fell 0.76 percent to $61.32 per barrel, and Brent was last at $65.10, down 0.23 percent on the day.
Reporting by Hilary Russ in New York; Additional reporting by Lindsay Dunsmuir and Jason Lange in Washington and April Joyner, Stephanie Kelly, Gertrude Chavez-Dreyfuss and Chuck Mikolajczak in New York; Editing by Steve Orlofsky and Leslie Adler