The US dollar surged to its highest level in 14 years against a basket of major currencies on Thursday on anticipation of a more hawkish Federal Reserve and a boost in US economic growth under President-elect Donald Trump. The dollar index, which measures the greenback against a basket of six major rivals, jumped as much as 1.5 percent to a roughly 14-year high of 103.320. It was on track for its biggest daily percentage gain in nearly six months.
The dollar's gains, which included a roughly 14-year high against the euro and a nearly 10-1/2-month high against the yen, came a day after the Fed raised interest rates for the first time in a year and signalled it was likely to hike three more times in 2017, up from the two increases forecast at the central bank's September meeting.
A 25-basis-point rate hike had been widely expected by financial markets, but the signal that rates were likely to rise at a faster-than-expected pace surprised investors and continued to fuel gains in the dollar on Thursday. "There is an expectation that there is going to be a strong economy next year with the Fed raising rates, and that is being reflected in the dollar's strength globally," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.
Analysts said the dollar was also gaining on expectations that the incoming Trump administration's economic plans would complement the Fed's pace of rate increases and boost the dollar further.
The dollar was last up 1.14 percent against the yen at 118.35 yen after rising as much as 1.4 percent to 118.66 yen, its highest level since early February. The euro was down 1.08 percent at $1.0421 after falling as much as 1.3 percent to $1.0396, its lowest since early January 2003. The dollar hit a more than one-year high against the Swiss franc of 1.0324 francs.
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