The dollar rallied to the highest in more than a decade after government reports showed U.S. economic growth remains intact, supporting the case for higher interest rates.
The U.S. currency rose against most of its major peers as Federal Reserve officials said the labor market has tightened, with some indicating a rate hike should happen in December, according to minutes of their November gathering released in Washington. Orders for business equipment climbed in October for the fourth month in the last five, while sales also advanced, helping to extend the greenback's gains since the Nov. 8 presidential election of Donald Trump.
"There was nothing in the minutes to suggest the Fed won't move rates in December," said Alan Ruskin, global co-head of foreign-exchange research in New York at Deutsche Bank AG. "The presidential election and prospects for fiscal stimulus is what the market are really focused on. So it's not just the next Fed meeting, but prospective tightening next year and the year after. That policy mix is seen as being very dollar friendly for some time to come."
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, gained 0.7 percent as of 2:39 a.m. in New York, reaching the strongest level since at least 2005. The greenback gained 1.4 percent to 112.65 yen.
A gauge of whether asset-price movements have gone too far, too fast is signaling the rally maybe overdone. The 14-day relative strength index has risen above the 70 threshold for 10 days, flashing signal of a reversal.
With the market seeing action at the Fed's Dec. 13-14 meeting as a certainty, attention is shifting to next year, where futures show a more than 50 percent chance of further rate hikes by June.
HSBC Holdings Plc revised up its dollar forecasts, citing the prospect for higher U.S. rates following the election.
Still, a lack of certainty over the Trump administration's policies makes it "problematic for the foreign-exchange market to price the election outcome with conviction," HSBC strategists including New York-based Daragh Maher said in a note.
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