The U.S. 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 U.S. economic growth under President-elect Donald Trump.
The , 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 peso also spiked on Thursday to an intraday high after the Bank of Mexico raised its overnight rate by 50bps to 5.75 percent. The central bank said the U.S. election has increased risks of policies that could negatively impact the bilateral relationship with Mexico.
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 signaled 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 0.79 percent against the at 117.95 yen after rising as much as 1.4 percent to 118.66 yen, its highest level since early February. The euro was down 1.09 percent at $1.042 after falling as much as 1.3 percent to $1.0396, its lowest since early January 2003.
Barclays expects the euro to reach parity with the dollar by the third quarter of 2017 and then to fall below $1, while JP Morgan Asset Management expects the two currencies to become equal in the first quarter of next year.
"The only thing that can change the market view is if the new administration falls through on its promised policies," said Sireen Harajli, currency strategist at Mizuho Corporate Bank in New York, in reference to the view of a stronger dollar heading into next year.
The dollar hit a more than one-year high against the of 1.0324 francs.