Markets price >90% chance of 75bp Fed hike this week Dollar...

• Markets price >90% chance of 75bp Fed hike this week
• Dollar index hits 20-year peak above 105
• Yen wallows as BOJ piles in to bond market

The U.S. dollar stood just below a 20-year peak on Tuesday and just about everything else nursed losses as investors braced for aggressive Federal Reserve rate hikes and a possible recession.

Markets have scrambled to bet on rapid-fire hikes in the wake of an unexpectedly hot inflation reading on Friday. Consecutive 75 basis point rate rises in June and July are close to fully priced, sending shockwaves across asset classes.

The dollar has gained with yields and as investors seek shelter from the storm. The dollar index =USD scaled a two-decade peak of 105.29 on Monday and held near that level in Asia.

It has hit one-month highs on the euro, Australian dollar, New Zealand dollar, Swiss franc and Canadian dollar and it made a fresh one-month top of $1.0397 per euro EUR=EBS on Tuesday, before retreating slightly to $1.0438.

Sterling GBP=D3 scraped from a two-year low to $1.2180, but is weighed down as the Fed is seen outpacing the Bank of England, which is expected to deliver a 25 bp hike on Thursday. BOEWATCH

Even the Norwegian crown NOK=D3 , which has been supported by firm oil prices and a central bank that began hiking last year, touched a two-year low of 9.9295 per dollar in Asia.

"The dollar seems to be the stagflation hedge of choice," said Bank of Singapore strategist Moh Siong Sim.

"The market is starting to turn a lot more fearful," he said. "On the inflation front, things do not look good and the Fed needs to respond."

The Aussie AUD=D3 was the best performer throughout the Asia session, attempting a bounce with S&P 500 futures ESc1 . It was last up 0.5% to $0.6962, though that is still close to May's trough at $0.6829 and analysts remained cautious.

Nerves about official intervention also gave brief respite to the yen, but it was soon on the back foot after the Bank of Japan expanded a round of bond purchases, knocking the 10-year government bond yield back to its 0.25% cap.

It last traded at 134.55 per dollar JPY=EBS after hitting a 24-year low of 135.22 on Monday.

"Given Wednesday may see the Fed go 75bps and flag more, while the BOJ on Friday will only flag more bond buying, JPY is not going to stay at these levels for long. It's going to get much, much worse," said Rabobank strategist Michael Every.

FED WATCH The Fed concludes a two-day meeting on Wednesday and CME's FedWatch tool shows markets priced for a 96% chance of a 75 basis point hike, which would be the biggest since 1994.

Goldman Sachs tips 75 basis point moves at both the June and July meetings and rates at 3.25-3.5% by year end.

Futures show expectations of nearly 200 bps of tightening by September and the two-year Treasury yield is up about 50 basis points since Thursday's close at 3.3091% US2YT=RR . 0#FF:

The 10-year yield US10YT=RR similar, at 3.3085%, in a signal that investors fear the rapid tightening path will hurt growth and possibly bring on a recession.

"The policy challenge is that the Fed has no idea how much monetary tightening is needed and will only find out it has done too much, long after the event," said Societe Generale strategist Kit Juckes.

Dollar gains have punished emerging market currencies, and the flight from risky investments has battered cryptocurrencies.

Bitcoin BTC=BTSP is down 30% in June and came close to dropping below $20,000 in Asia before steadying around $22,000, while ether ETH=BTSP also tested resistance around $1,000.

India's rupee INR=IN hit a record low on Monday. South Korea's won KRW=KFTC touched its lowest level since March 2020 on Tuesday at 1,292.5 per dollar, though it was kept from further losses by official hints at intervention and dealers' suspicion that authorities were selling dollars.

The Malaysian ringgit MYR=MY , Thai baht THB=TH and Indonesian rupiah IDR=ID made multi-year lows.

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	Currency bid prices at 0640 GMT 

 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS	$1.0438		$1.0405	 +0.32%		 -8.18%	  +1.0442	 +1.0397 
 Dollar/Yen		JPY=EBS	134.6000	   134.5300	+0.00%		 +16.96%	 +134.8100   +133.9000 
 Euro/Yen		 																			 
 Dollar/Swiss	  CHF=EBS	0.9948		 0.9972	  -0.23%		 +9.07%	  +0.9977	 +0.9949 
 Sterling/Dollar   GBP=D3	 1.2169		 1.2130	  +0.33%		 -10.02%	 +1.2207	 +1.2131 
 Dollar/Canadian   CAD=D3	 1.2881		 1.2897	  -0.11%		 +1.89%	  +1.2900	 +1.2867 
 Aussie/Dollar	 AUD=D3	 0.6954		 0.6927	  +0.41%		 -4.32%	  +0.6970	 +0.6921 
 NZ				NZD=D3	 0.6282		 0.6262	  +0.40%		 -8.15%	  +0.6293	 +0.6257 
 Dollar/Dollar																				   

All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX

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World FX rates	https://tmsnrt.rs/2RBWI5E 

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