By Rae Wee

SINGAPORE, Sept 28 (Reuters) -

The dollar hit a fresh two-decade peak against a basket of currencies on Wednesday on the back of rising Treasury yields, while sterling languished near a record low on concerns over Britain's radical tax cuts to spur growth.

The U.S. dollar index hit a new high of 114.68 in Asia trade and was last up 0.42% at 114.62.

Meanwhile, benchmark U.S. 10-year Treasury yields rose to 4% for the first time since 2010, topping at 4.004%. The two-year yields stood at 4.2912%.

"It's a combination of the spillover from the UK... where the gilt yields have gone ballistic. And that has spilled over into other DM bond markets, so there's a bit of a ricochet effect," said Moh Siong Sim, a currency strategist at Bank of Singapore.

"And of course ... this is against the backdrop of a very determined message by the Fed to do whatever it takes to bring inflation down."

Chicago Fed President Charles Evans, St. Louis Fed President James Bullard and Minneapolis Federal Reserve Bank President Neel Kashkari had reiterated the Fed's hawkish stance overnight, with Evans saying that the central bank will need to raise interest rates to a range between 4.50% and 4.75%.

Sterling was down nearly 1% to $1.0634, reversing a marginal 0.4% gain in the previous session and still nursing deep losses after its slide to an all-time low of $1.0327 at the start of the week.

Bank of England Chief Economist Huw Pill said overnight that the central bank is likely to deliver a "significant policy response" to finance minister Kwasi Kwarteng's huge tax cuts.

But he added that the central bank wants to wait until its next scheduled meeting in November before making its move, quashing market speculations of a potential inter-meeting interest rate hike.

"For the near-term I think sterling's going to remain pretty weak from here," said Carol Kong, senior associate for international economics and currency strategy at the Commonwealth Bank of Australia.

"It's basically a crisis of confidence. It'll be up to the UK government to resolve this ... rather than Bank of England."

The stronger dollar pushed other currencies to multi-year lows on Wednesday, with the Aussie hitting a trough at $0.6389, its lowest since May 2020. The kiwi lost about 1% to $0.55645, similarly its lowest since March 2020.

The Chinese offshore yuan fell as far as 7.2349 per dollar, the lowest level since such data became available in 2011.

A source had told Reuters late on Tuesday that Chinese monetary authorities are asking local banks to revive a yuan fixing tool it abandoned two years ago as they seek to steer and defend the rapidly weakening currency.