Forex - Dollar holds steady near 14-year highs

© Reuters. Dollar pauses after hitting 14-year highs

Investing.com – The dollar paused on Thursday after rising to 14-year highs against a basket of the other major currencies on the back of expectations for a U.S. rate hike and increased fiscal spending under the incoming presidential administration.

The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 100.26.

On Wednesday, the index hit highs of 100.60, its highest level since April 2003.

The dollar has powered higher on expectations that the Federal Reserve is on track to raise interest rates next month.

said Wednesday that he was in favor of raising interest rates, while said the Fed must not overreact to market moves following the shock result of the presidential election.

Investors have assigned an 85.8% chance of a rate hike at the Fed’s December meeting; according to federal funds futures tracked Investing.com’s .

Expectations for higher rates typically boost the dollar by making it more attractive to yield seeking investors.

The dollar has also been boosted by rising U.S. government bond yields and expectations for ramped up fiscal stimulus once Donald Trump becomes president.

Many investors believe that Trump’s campaign pledges to boost spending, cut taxes and loosen financial regulation will lead to a pickup in economic growth and inflation.

Faster growth would spark inflation, which in turn would prompt the Fed to tighten monetary policy a faster rate than had previously been expected.

The dollar was steady against the yen, with at 109.05, holding just below the five-and-a-half month high of 109.74 set on Wednesday.

The euro pushed higher, with rising 0.22% to 1.0715, after falling to lows of 1.0665 on Wednesday, its lowest level since December 2015.

The pound also edged higher, with easing up 0.14% to 1.2461.

Investors were looking ahead to testimony by Fed chair Janet Yellen later in the day for anything that she may mention about the dollar’s recent rally and the rise in U.S. Treasury yields.

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Forex - Dollar holds steady near 14-year highs