By Sam Forgione
NEW YORK (Reuters) - The U.S. dollar hit a more than two-week high against a basket of major currencies on Friday after U.S. inflation data boosted bets the Federal Reserve would raise interest rates in December, and touched a one-month high against sterling on worries over Britain's Brexit vote.
The U.S. Labor Department said its Consumer Price Index rose 0.2 percent last month. In the 12 months through August, the CPI increased 1.1 percent. The figures beat expectations of economists polled by Reuters.
Traders' expectations of a rate hike from the Fed at its meeting next week rose slightly to 15 percent from 12 percent on Thursday, according to CME Group's FedWatch program, while expectations for December rose to nearly 52 percent from just over 47 percent.
The inflation data suggested a greater probability of a December move from the U.S. central bank and a quicker pace of rate increases next year, analysts said.
"It’s lining up nicely for the Fed to tie a bow on this year and give us that 25 basis point hike just before the holidays," said Stephen Casey, senior foreign exchange trader at Cambridge Global Payments in New York.
The dollar index, which measures the greenback against a basket of six major currencies, rose 0.8 percent to 96.063 <.DXY>. The euro <EUR=> hit a 10-day low against the dollar of $1.1149, while the dollar hit a two-week high against the Swiss franc <CHF=> of 0.9817 franc.
Sterling hit a one-month low against the dollar of $1.3001 <GBP=> after Bloomberg reported that Chancellor of the Exchequer Philip Hammond was "ready to accept" that Britain may have to give up membership of the European Union's single market, citing unnamed officials. The currency was last down 1.7 percent at $1.3015.
Hammond said in mid-July that Britain would leave the single market as a result of its decision to leave the EU. Britain voted to exit the EU on June 23.
"It’s just a sign that Brexit comes at a cost," said Vassili Serebriakov, FX strategist at Credit Agricole in New York.
The dollar was last up just 0.25 percent against the yen at 102.35 yen <JPY=> ahead of the BOJ's Sept. 20-21 policy meeting.
The dollar index was on track to post its best week in three, with a gain of about 0.8 percent, but the greenback was set for its second straight weekly loss against the yen, of about 0.3 percent.
(Reporting by Sam Forgione; Editing by James Dalgleish and Meredith Mazzilli)