LONDON: The dollar held near its highest point in almost nine years against a basket of currencies on Wednesday after investors brought forward forecasts for when U.S. interest rates will rise.
In sleepy Christmas holiday trade, the dollar had retreated just over 0.1 percent from highs reached after data on Tuesday showed the U.S. economy grew at an annualised 5.0 percent clip in the third quarter.
That was the strongest sign yet that growth has shifted into higher gear and it pushed the dollar index to highs not seen since March 2006, while the two-year yield on U.S. 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.
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 gained around 0.2 percent but was still anchored near a 28-month low of $1.2165 hit after the U.S. GDP data, last trading at $1.2198. That was 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 by some to fall below 80 U.S. 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 $0.8110.
Sterling was also little changed, up 0.16 percent against the dollar and down 0.1 percent against the euro at $1.5544 and 78.48 pence respectively.
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