The dollar surged to a nearly two-year high on Wednesday after minutes of the last Federal Reserve meeting reinforced expectations of multiple half percentage-point rate increases to control soaring inflation.

The dollar index, which measures the greenback's value against six major currencies, climbed to 99.7780 , its strongest level since late May 2020. It was last up 0.1% at 99.588. Fed officials viewed the hefty rate increases as appropriate at future meetings, especially if inflation pressures intensify, minutes showed.

They would also have preferred a 50 basis point rise in the target range for the federal funds rate at the March meeting.

"There's a realization that some of the doves have come over to the 50 basis point hike territory and that is likely what we're going to see at the next several meetings going forward as inflationary pressures remain elevated," said Ryan Detrick, chief market strategist at LPL Financial in Charlotte, North Carolina.

"The Ukraine conflict uncertainty likely prevented a 50 basis point hike last month, so it could put a little cold water on extremely hawkish policy. But still, we know multiple hikes are coming very soon," Detrick added.

Fed officials also agreed to reduce the balance sheet by $95 million per month - $60 billion of its Treasury holdings and $35 billion of mortgage-backed securities - over three months, according to the minutes of the March meeting. Analysts at Action Economics said the $95 billion balance sheet run-off was close to expectations of $100 billion per month.

The U.S. currency also hit the nearly two-year milestone on Tuesday after Fed Governor Lael Brainard, usually a more dovish policymaker, said she expected a combination of rate increases and a rapid balance sheet runoff to bring U.S. monetary policy to a "more neutral position" later this year.

Further tightening would follow as needed, she added. Analysts said the Fed minutes were less hawkish than Brainard's comments.

The dollar held gains against the yen, which tracks U.S. two-year yields reflecting Fed policy expectations, trading up 0.1% at 123.78 yen..

"Clearly we've got rate hikes ahead of us, and we have a shrinking balance sheet ahead of us," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. "The Fed is determined to rein in inflation, and we just hope and pray that there will be a soft landing of the economy and not a hard landing that sends us into a recession."

The euro, on the other hand, was little changed versus the dollar, after falling to its lowest in a month as the prospect of new Western sanctions on Russia and the upcoming French presidential election added to pressure to the European currency.

Europe's single currency benefited earlier from strong euro zone producer prices for February, which surged 31.4% year-on-year in February. The euro was last slightly down at $1.0896, after briefly touching a nearly one-month low of $1.0874.