LONDON/NEW YORK: The dollar dropped to a two-month low against a major currency index, 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 0.4% at 140.75 yen. The US currency also plunged to its lowest in two-and-a-half years versus the Swiss franc and was last at 0.8829 francs, down 0.2%.

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 US rates may have to rise.