The dollar hit a seven-month peak against a currency basket on Wednesday in choppy trading after minutes of the last Federal Reserve policy meeting suggested that a December rate increase was on the cards given the improvement in global market conditions and the U.S. economy.
The U.S. currency also rose to a 10-month peak against the Swiss franc and struck its highest level since August versus the following the Fed minutes.
The minutes showed several Fed officials pushed for a possible December hike at the central bank's last meeting in October. It was an unusually direct reference to the December increase, with only "a couple" of members expressing concerns about setting too strong an expectation of action.
"The minutes from the meeting...should keep alive the dollar's broader trend higher,' said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
"More importantly, there was not a significant discussion regarding the headwinds caused by a strong dollar."
Comments by Fed officials on Wednesday pertaining to a lift-off in rates have cemented the view of a December move. Atlanta Fed President Dennis Lockhart, a voting member of the Federal Open Market Committee, said, for instance, it will soon be appropriate to raise rates as global financial markets have stabilized since the August turmoil.
New York Fed President William Dudley and Cleveland Fed President Loretta Mester more or less echoed Lockhart's sentiment.
Futures traders, however, have placed a 68 percent chance of the Fed raising rates in December, down from 72 percent this morning, according to the CME Group's FedWatch on Wednesday.
Alfonso Esparaza, senior currency strategist at OANDA in Toronto, said the fact that there was debate about the U.S. economic outlook among Fed members may have reduced the probability of a December action.
The dollar index hit a fresh seven-month high of 99.853, and was last flat on the day at 99.59. The dollar was up slightly against the yen at 123.53 yen, after touching a three-month peak of 123.67 following the Fed minutes.
The U.S. currency rose to a 10-month high against the Swiss franc of 1.0219 francs. It last changed hands at 1.0192, up 0.54 percent.
The franc's weakness was also stoked by comments from the Swiss National Bank earlier saying in a statement that it was gearing current policies to weaken the country's overvalued currency.
The single currency, meanwhile, was nearly flat on the day versus the dollar at $1.0648.