* Traders move to price in hikes for BoE and ECB this

year; Fed seen leaving rates on hold

* Hawkish rate repricing hits bonds, topples dollar

* Oil prices retreat; shares choppy

(Updates to Asia afternoon)

By Rae Wee

SINGAPORE, March 20 (Reuters) - The dollar headed

towards a weekly loss on Friday while bonds remained under

pressure, after global central bankers warned that the Middle

East war could reignite inflation.

A dip in oil prices offered brief relief for markets, but

trading stayed choppy and nerves frayed, highlighting how

brittle investor confidence remains.

Following a hectic week of monetary policy meetings across

effectively the Group of Seven (G7) nations and others, the key

takeaway for investors has been the prospect of a more

aggressive policy tightening path.

Traders are no longer expecting a Federal Reserve rate cut

this year, futures imply a 40% chance of a hike from

the Bank of England next month and sources said the

European Central Bank may need to begin discussing rate

increases in April and possibly tighten policy in June

.

"There's a lot of value in the signal," said Vishnu

Varathan, Mizuho's head of macro research for Asia ex-Japan, of

the hawkish rhetoric from central banks this week.

"It's a messaging to markets that we are on top of this, you

don't need to send yields unnecessarily higher, because... the

yields are already starting to do the work for them."

A rout in global bonds pushed yields to multi-month highs on

Thursday, though the selloff showed some signs of abating in

Asia on Friday.

Trading of cash U.S. Treasuries was closed due to a holiday

in Japan, but futures edged marginally higher.

The yield on the two-year U.S. Treasury note,

which typically reflects near-term rate expectations, had jumped

as much as over 20 basis points in the previous session.

Germany's bund futures were up 0.06%, while French

OAT futures rose 0.16%.

Still, for the month thus far, Germany's two-year yield

has already risen some 56 bps. Yields on two-year

British gilts have jumped 88 bps.

ENERGY CHOKEHOLD

Brent crude futures were down 1.6% at $106.90 a

barrel on Friday while U.S. crude fell 1.9% to $94.32 per

barrel, after leading European nations and Japan offered to join

efforts to secure safe passage for ships through the Strait of

Hormuz and the U.S. outlined moves to boost oil supply.

But both remained well above levels prior to the

U.S.-Israeli war on Iran, having risen more than 40% this month.

Natural gas prices have also soared, with those in Europe

skyrocketing as much as 35% on Thursday, as Iranian and Israeli

strikes targeted some of the Middle East's most important gas

infrastructure.

That prompted U.S. President Donald Trump to tell Israel not

to repeat its attacks on Iranian natural gas infrastructure.

"Even if the U.S. leaves (the conflict), Israel might not

leave, and there may still be some strikes and Iran will

retaliate, maybe at a lower volume," said Alicia Garcia-Herrero,

chief Asia-Pacific economist ​at Natixis.

"But this means that the Gulf will still be under

pressure... so oil prices will not go back to $60, they will

maybe stay at $90, at least until the end of the year. So the

shock is already unavoidable."

On the equities front, MSCI's broadest index of Asia-Pacific

shares outside Japan swung between losses and

gains to be 0.2% lower, though was set for a weekly gain of

0.3%, snapping two straight weeks of losses.

Nasdaq futures and S&P 500 futures added about

0.1% each. EUROSTOXX 50 futures were up 0.7%, while

FTSE futures rose 0.15%.

DOLLAR FALLS FROM PEAK

The dollar was set for a weekly loss of roughly 1%,

as the Fed is now seen as the only major central bank that is

not expected to raise rates this year.

That kept the euro holding to most of Thursday's 1.2%

gain to fetch $1.1560, while sterling dipped 0.17% to

$1.3408, after a 1.3% rise overnight.

Even the yen, which was on the cusp of 160 per dollar

in the previous session, found some support and stood at 158.36.

The Japanese currency was also helped by some hawkish

comments from Bank of Japan Governor Kazuo Ueda on Thursday,

after the central bank held rates steady but maintained its bias

for tighter monetary policy.

Yusuke Miyairi, Nomura's JPY FX and rates strategist, said

that while Ueda may have left the door open to a rate hike in

April, it remains "premature" to conclude that such a move would

be coming.

In precious metals, spot gold was up 1% at $4,693 an

ounce.