* Dollar index pulls away from 4-1/2-month lows
* Fed speakers remind markets of rate hike plans
* Sterling dips as Britain formally launches Brexit
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Ritvik Carvalho
LONDON, March 29 (Reuters) - The dollar pulled away from 4-1/2-month lows on Wednesday after solid data backed expectations for more U.S. interest rate hikes this year, while sterling dipped as Britain moved to launch its exit from the European Union.
The dollar index, which tracks the greenback against six major rival currencies, rose to 99.854, up 0.2 percent. It managed to crawl off a low of 98.858 hit earlier this week, its weakest level since Nov. 11, in the wake of U.S. President Donald Trump’s failed healthcare bill.
Data on Tuesday showed the U.S. consumer confidence index at its highest level since December 2000, pushing up U.S. Treasury yields and providing support for the greenback.
City Index research director Kathleen Brooks, in London, said the dollar’s strength was down to a mixture of Fed expectations, the stronger U.S. data, and hopes that Trump would now focus on tax reform.
“The continuing strength of the U.S. economic data is obviously a key driver,” said Brooks. “We’re also seeing the positive correlation between the stock market and the dollar reinstated. So as the stock market recovers, that’s obviously good news for the dollar as well.”
“By and large the market is giving Trump a second chance, and we think there’s a Trump premium in the market,” she added.
Trump’s healthcare reform defeat at the end of last week raised doubts about his ability to carry out his fiscal stimulus and tax cuts, and pushed the dollar to 110.11 yen on Monday, its lowest since Nov. 18.
It has since recovered almost 1 percent but was still lower 0.2 percent at 110.96 yen on Wednesday.
“(The dollar’s strength) is probably more a function of the very strong U.S. consumer confidence numbers we saw yesterday and the somewhat more hawkish noises we’ve seen emanating from the Fed,” said Alvin Tan, currency strategist at Societe Generale in London.
U.S. Federal Reserve Vice Chairman Stanley Fischer said in a television interview on Tuesday that two more increases to U.S. overnight interest rates this year seemed “about right”.
The Fed raised rates in March, and a majority of the central bank’s policymakers foresee at least two more increases this year.
But Fed Governor Jerome Powell said on Tuesday that the collapse of the healthcare bill had made the U.S. central bank’s job harder as it tried to anticipate which set of policies would pass.
Sterling steadied at $1.2452 as investors focused on Britain’s formal request to leave the European Union.
The euro was down 0.2 percent on the day at $1.0792.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (additional reporting by Tokyo markets team; Editing by Jermey Gaunt)