LONDON: The dollar held near its highest point in almost nine years against a basket of currencies on Wednesday as markets brought forward forecasts for when interest rates will rise, after data showing the strongest US growth in 11 years.
The US economy grew at an annualised 5.0 percent clip in the third quarter, in the strongest sign yet that growth has decisively shifted into higher gear.
That pushed the dollar index to highs not seen since March 2006, while the two-year yield on US Treasuries jumped to an almost four-year high of 0.747 percent.
"I think we can be quite comfortable in the stronger dollar view going into year-end following yesterday's strong GDP data," Michael Sneyd, a currency strategist at BNP Paribas in London.
The dollar index is up more than 12 percent this year, on track for its best annual performance in nearly a decade, though the rally only took off in the second half of 2014 - a long time coming for those who had turned bullish on the greenback this time last year.
And the "buy-the-dollar" trend should persist, given that there is little incentive for investors to look at either the euro or yen, with the euro zone and Japanese central banks under pressure to stimulate growth through even more aggressive policy easing.
The euro was anchored near the 28-month low of $1.2165 it hit after the US GDP data, last trading at $1.2188, well below its 200-month moving average at $1.2230, a long-term technical support level for the currency.
"I think the euro could fall below $1.20 as soon as January," said Takahiro Suzuki, vice president of FX at Nomura Securities in Tokyo.
Commodity currencies are also likely to remain out of favour early in 2015 given slowing global demand, which has seen oil and iron ore prices tumble.
The Australian dollar is expected to fall below 80 US cents in the months ahead, having shed more than 9 percent this year and falling to a 4-1/2 year low of $0.8087 on Tuesday. It last traded up 0.1 percent at $0.8113.
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