* Dollar index on track for largest daily fall since Jan. 12
    * Fed funds futures price in five rate hikes in 2022
    * Aussie dollar leads gainers vs U.S. dollar

 
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 31  (Reuters) - The U.S. dollar fell on
Monday, posting its largest daily fall since last November as
investors consolidated gains after hitting a 1-1/2-year high on
Friday on expectations of a faster pace of rate hikes by the
Federal Reserve.
    With the Fed clearly signaling last week that it intends to
raise interest rates as early as the March 15-16 policy meeting,
Wall Street banks are now expecting are now expecting about five
to seven rate hikes this year.
    Fed funds futures late Monday have priced in just
under five hikes for 2022, or about 121 basis points of
tightening. They also showed a 17% chance of a 50 basis-point
increase in March, down from as high as 32% on Friday.
    Atlanta Fed President Raphael Bostic, a non-voter on the
Federal Open Market Committee told the Financial Times in an
interview over the weekend the Fed could super-size a rate
increase to half a percentage point if inflation remains
stubbornly high.
    The dollar index slid 0.7% on the day, its highest
daily percentage rise in two months. For January, the greenback
was up nearly 1%.
    "Dollar dominance has been mostly priced in as the Fed now
seems poised to deliver 5-7 rate hikes this year," wrote Edward
Moya, senior market analyst, at OANDA, in a research note.
    The dollar could start to see "some underperformance against
advanced economies that grow more aggressive in tightening," he
added.
    Investors are also looking to Friday's U.S. nonfarm payrolls
for an indication of how aggressive the Fed can be on its
tightening path. U.S. payrolls are forecast to show a gain of
153,000 jobs for January, down from 199,000 in December, with
the unemployment rate holding steady at 3.9%, according to a
Reuters poll.       
    "The buck appears to have peaked for now as Friday's jobs
report is forecast to show another month of tepid hiring," said
Joe Manimbo, senior market analyst at Western Union Business
Solutions in Washington.
    A quicker pace of rate hikes is also seen as dampening
future growth expectations, a scenario playing out in bond
markets where spreads between 2-year and 10-year U.S. Treasury
yields fell below 59 basis points for the first
time since early November, a phenomenon known as
"bear-flattening."
    In other currencies, the Australian dollar led
gains, rising 1% to US$0.7068 before a Reserve Bank of Australia
policy meeting on Tuesday.
    Against the yen, the dollar fell 0.2% to 115.045 yen
.
    The Bank of England also holds its policy meeting on
Thursday, with a Reuters poll predicting a second rate hike in
less than two months after UK inflation jumped to its highest in
nearly 30 years.
    Sterling was last up 0.4% at $1.354
    The European Central Bank also meets on Thursday. While no
policy change is expected, analysts said the Fed's looming rate
hikes will narrow the ECB's window for action.
    The euro last traded up 0.8% at $1.1240, its best
daily percentage gain in two months.
    
    ========================================================
    Currency bid prices at 3:53PM (2053 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change                   
                                              Session                                             
 Dollar index                 96.5840        97.1890     -0.61%         0.963%        +97.2580    +96.5120
 Euro/Dollar                  $1.1237        $1.1147     +0.81%         -1.16%        +$1.1248    +$1.1139
 Dollar/Yen                   115.0700       115.2400    -0.13%         -0.03%        +115.5900   +114.9200
 Euro/Yen                     129.31         128.45      +0.67%         -0.78%        +129.3700   +128.4600
 Dollar/Swiss                 0.9264         0.9311      -0.50%         +1.57%        +0.9342     +0.9252
 Sterling/Dollar              $1.3453        $1.3401     +0.41%         -0.51%        +$1.3460    +$1.3389
 Dollar/Canadian              1.2700         1.2762      -0.49%         +0.44%        +1.2776     +1.2683
 Aussie/Dollar                $0.7070        $0.6996     +1.06%         -2.73%        +$0.7076    +$0.6986
 Euro/Swiss                   1.0410         1.0378      +0.31%         +0.40%        +1.0441     +1.0378
 Euro/Sterling                0.8351         0.8321      +0.36%         -0.58%        +0.8358     +0.8306
 NZ                           $0.6582        $0.6545     +0.57%         -3.83%        +$0.6597    +$0.6540
 Dollar/Dollar                                                                                    
 Dollar/Norway                8.8900         8.9760      -0.93%         +0.94%        +9.0035     +8.8870
 Euro/Norway                  9.9922         10.0109     -0.19%         -0.20%        +10.0390    +9.9733
 Dollar/Sweden                9.3177         9.4317      -0.35%         +3.32%        +9.4346     +9.3041
 Euro/Sweden                  10.4710        10.5075     -0.35%         +2.32%        +10.5137    +10.4349
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Saikat Chatterjee in London; Editing by Mark Potter and Paul
Simao)