NEW YORK (Reuters) – The US dollar ended 2014 with a gain of nearly 13 per cent against a basket of major currencies on Wednesday, its strongest year since 1997 and, according to most major banks, just a prelude to a further rise next year.
Traders favored the dollar as this year’s winning bet heading into the New Year and pushed the euro to a fresh 29-month low against the greenback of $1.2098, just below a closely watched $1.21 technical level. The dollar also hit a new 29-month high against the Swiss franc of 0.9944 franc in thin trade.
The dollar index, which measures the greenback’s value against a basket of six major currencies, was last up 0.33 per cent at 90.288. The index posted its largest annual gain since it climbed just over 13 per cent in 1997.
“The winning trade has been in the dollar, and traders are closing the year holding on to their strong dollar positions,” said Chris Gaffney, senior market strategist at EverBank Wealth Management in St Louis. The contrast between the US Federal Reserve’s path towards raising interest rates next year and looser monetary policies in the euro zone and Japan was the driving force behind the dollar index’s rise to its highest in more than 8-1/2 years on Tuesday. However, it is not clear whether further gains in the first half of next year might put the Fed off raising rates.