SINGAPORE  - The dollar hovered near a two-year high against a basket of currencies on Thursday, after meeting minutes showed the Federal Reserve preparing to move aggressively to head off inflation.

The U.S. dollar index, which measures the greenback against six majors, touched its highest since May 2020 overnight at 99.778 and held nearby at 99.575 in early Asia trade.

Commodity currencies retreated from recent highs as oil prices have dipped and the euro touched a one-month trough of $1.0874. It recovered to $1.0911 in morning trade.

Minutes from the Federal Reserve's March meeting showed "many" participants prepared to raise interest rates in 50-basis-point increments at coming meetings.

They also showed general agreement about cutting $95 billion a month from asset holdings which had ballooned during the pandemic.

That was more or less in line with market expectations, but policymakers preparedness to begin as soon as May was confronting and will likely keep the dollar elevated.

"The market has been slow to accept the reality that quantitative tightening is coming much sooner than previously expected," said Brent Donnelly of analytics firm Spectra Markets.

"This should keep stocks heavy and the dollar supported into the May 4th Fed meeting," he said. Minutes from the European Central Bank's March meeting, due later in the day, are unlikely to include such hawkish plans, though they could offer insight into policymakers' delicate balancing act to manage soaring inflation and slowing growth.

The Fed's tone seemed to offset a hawkish shift from Australia's central bank earlier in the week and the Aussie was pulled down by about 0.8% overnight to sit at $0.7503.

The kiwi sat at $0.6905. The stronger greenback had the yen hovering near a one-week low at 123.64 per dollar.

Sterling was pinned at $1.3076. Broad selling of equities and other risk assets as higher interest rates loom also hurt cryptocurrencies, and bitcoin fell 5% overnight to $43,000. 

(Reporting by Tom Westbrook. Editing by Sam Holmes.)