(Adds new comment, updates prices)
* Dollar drops to four-week low vs yen
* Dollar sinks to 2-1/2-year trough vs Swiss franc
* Focus on U.S. consumer inflation data on Wednesday

By Gertrude Chavez-Dreyfuss
       NEW YORK, July 11 (Reuters) - The dollar dropped to a two-month low against a major currency index
on Tuesday, after Federal Reserve officials signalled that the central bank is near the end of its
tightening cycle, while sterling hit a 15-month high after pay growth exceeded expectations.
    Against the yen, the dollar fell to a four-week trough of 140.17. It last traded down 0.7% at 140.335
yen. The U.S. currency also plunged to its lowest in two-and-a-half years versus the Swiss franc, and was
last at 0.8799 francs, down 0.6%.
    Several Fed officials said on Monday the central bank would likely need to raise interest rates further
to bring down inflation but the end to its current monetary policy tightening cycle was getting close.
    The comments knocked the greenback to a two-month low of 101.66 against a basket of currencies,
as traders pared back their expectations about how much further U.S. rates may have to rise. The dollar
index was last down 0.2% at 101.69.
        "Friday's NFP (nonfarm payrolls) report revealed, for the first time since COVID, potential cracks
in the U.S. labor market, hinting that the Fed may have to settle on just a single rate hike in the second
half of the year," said Matt Weller, global head of research at Forex.com and City Index.
  
        The June non-farm payrolls report showed the fewest job gains in 2-1/2 years.
  
        "Meanwhile, this morning's strong UK wage growth data and the ongoing short squeeze in the Japanese
yen are driving two of the greenback's biggest rivals higher as traders anxiously await tomorrow's U.S. CPI
report," Weller added.
  
        Expectations are for core U.S. consumer prices to have risen 5% on an annual basis in June. The CPI
data should provide more clarity on the Fed's progress in its fight against stubbornly high inflation.
  
    "Market participants should remember that U.S. data releases still have the capacity to shock: if the
core or 'supercore' inflation measures surprise to the upside, front-end yields could leg higher once again,
and the dollar might stage a surprising rebound," said Karl Schamotta, chief market strategist at Corpay in
Toronto.
    
    EUROPEAN CURRENCIES STRENGTHEN    
    Sterling hit a near 15-month high of $1.2934 after British wage growth hit a joint record high,
heaping pressure on the Bank of England to tighten policy further to bring inflation under control. It was
last up 0.5% at $1.2920.
    The pound has been rallying on a stronger economy and aggressive repricing of expectations for tighter
BoE policy, analysts said.
    The euro rose to two-month peaks of $1.1027, and last changed hands at $1.1006, up slightly in
the day.
    Other European currencies were also strong, with the Norwegian crown hitting a near three-month
high and the Swedish crown at a two-week peak against the dollar.
    In Japan, the yen has risen more than 3% from a seven-month low touched last month, when it weakened
past the closely watched 145 per dollar level that put traders on high alert for possible intervention from
Japanese authorities.
    Elsewhere, the Australian dollar was flat at US$0.6674, while the New Zealand currency
was down 0.4% at US$0.6191 ahead of the Reserve Bank of New Zealand policy decision on Wednesday.
    
    ========================================================
    Currency bid prices at 1:16PM (1716 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change                   
                                              Session                                             
 Dollar index                 101.7000       101.9200    -0.21%         -1.730%       +101.9700   +101.6600
 Euro/Dollar                  $1.1003        $1.1001     +0.04%         +2.71%        +$1.1027    +$1.0977
 Dollar/Yen                   140.3850       141.3150    -0.66%         +7.07%        +141.4550   +140.1700
 Euro/Yen                     154.48         155.45      -0.62%         +10.11%       +155.6700   +154.1900
 Dollar/Swiss                 0.8799         0.8854      -0.62%         -4.84%        +0.8856     +0.8798
 Sterling/Dollar              $1.2919        $1.2860     +0.46%         +6.83%        +$1.2934    +$1.2858
 Dollar/Canadian              1.3252         1.3280      -0.23%         -2.22%        +1.3289     +1.3246
 Aussie/Dollar                $0.6671        $0.6677     -0.06%         -2.11%        +$0.6695    +$0.6652
 Euro/Swiss                   0.9683         0.9737      -0.55%         -2.14%        +0.9753     +0.9678
 Euro/Sterling                0.8516         0.8553      -0.43%         -3.71%        +0.8562     +0.8505
 NZ                           $0.6188        $0.6212     -0.36%         -2.52%        +$0.6224    +$0.6168
 Dollar/Dollar                                                                                    
 Dollar/Norway                10.3530        10.4770     -1.16%         +5.51%        +10.4790    +10.3550
 Euro/Norway                  11.3928        11.5250     -1.15%         +8.64%        +11.5385    +11.3906
 Dollar/Sweden                10.6709        10.7481     -0.79%         +2.53%        +10.7604    +10.6693
 Euro/Sweden                  11.7318        11.8255     -0.79%         +5.22%        +11.8415    +11.7266
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Samuel Indyk in London and Rae Wee in
Singapore; Editing by Chizu Nomiyama, Louise Heavens and Andrea Ricci)