Hairy

wiktionary

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From Middle English hery, heeri, hary, equivalent to hair +‎ -y. Compare Saterland Frisian hierich(“hairy”), West Frisian hierrich(“hairy”), Dutch harig(“hairy”), German Low German harig(“hairy”), German haarig(“hairy”), Swedish hårig(“hairy”), Icelandic hárugur(“hairy”). Compare also Old English hǣriht(“hairy”) and ġehǣre(“hairy”).

The sense "terrifying, scary" possibly results from a blend of hair-raising and scary.

etymonline

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hairy (adj.)

early 14c., "covered with hair, rough, shaggy," from hair + -y (2). From 1848 in slang sense of "difficult," perhaps from the notion of "rugged, rough." Farmer calls this "Oxford slang." Related: Hairiness. For adjectives Old English had hæriht, hære "hairy;" hæren "of hair."