By Saqib Iqbal Ahmed

NEW YORK (Reuters) -The safe-haven U.S. dollar rose to a fresh two-decade high against a basket of currencies on Monday, supported by fears of a global economic slowdown and bets on steep interest rate hikes by the U.S. Federal Reserve.

Global financial markets continued to smart from Friday’s hotter-than-expected U.S. inflation data that led to a broad-based rise in risk aversion and fuelled bets on even more aggressive policy tightening.

On Monday, government bonds sold off and stock markets around the globe took a beating.

“The USD extended its gains from Friday as risk continues to unwind across the board,” said Brad Bechtel, global head of FX at Jefferies said in a note.

The U.S. Dollar Currency Index, which tracks its performance against six other major currencies, was up 0.6% at 105.04, after scaling its highest since December 2002.

Traders have a lot on their plate this week, including policy meetings by the Fed, the Bank of England and the Swiss National Bank.

The U.S. Federal Reserve is widely expected to raise its key interest rate by 50 basis points on Wednesday, with some, including Barclays and Jefferies, expecting to the Fed to go for a 75 basis point move.

“A 75 bps (basis points) move is definitely going to be a surprise for some who are holding a hard line on 50 bps,” Bechtel said, adding he expects the dollar index to move higher on such a move.

The battered Japanese yen, floundering near lows against the dollar not seen since 1998, was one major currency that advanced against it on Monday.

The yen found some support from comments by Japan’s top government spokesperson that Tokyo is concerned about its sharp fall and stands ready to “respond appropriately” if needed.

“The increasingly strident tone from policymakers suggests they may escalate from verbal intervention soon,” Tom Learmouth, Japan economist at Capital Economics, said in a note.

“We don’t think that FX intervention would bring anything other than fleeting respite at potentially high cost,” Learmouth added.

On Monday, the dollar was 0.1% lower at 134.25 yen.

The Australian dollar, seen as a liquid proxy for risk appetite, fell 1.7%.

Sterling fell to a one month low against the dollar, coming under selling pressure after data showed Britain’s economy had unexpectedly shrunk in April. Tensions with the European Union over post-Brexit trade with Northern Ireland also weighed on the pound, which was down 1.4% to $1.2146.

Bitcoin slumped 20.0% to $23,350.5, on pace for its worst day in more than two years, after major U.S. cryptocurrency lending company Celsius Network froze withdrawals and transfers citing “extreme” conditions, in the latest sign of how financial market turbulence is causing distress in the cryptosphere.

(Reporting by Saqib Iqbal Ahmed; Editing by William Maclean)