Dollar touches 14-year high; yen falls after BOJ

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The dollar climbed to a 14-year high on Tuesday after Federal Reserve Chair Janet Yellen's comments about the labor market reinforced the notion of a faster pace of U.S. interest rate hikes next year than had been expected.

The greenback strengthened against major currencies with the rise in U.S. Treasury yields after Yellen said on Monday that the U.S. labor market was more robust than it had been in almost a decade, suggesting wage growth is picking up.

Fed's wind of optimism helping US dollar and yields move higher: Strategist

The dollar rally and bond market selloff since the Nov. 8 U.S. election have also been stoked by bets that U.S. President-elect Donald Trump's administration would cut taxes and increase fiscal spending, which would result in higher U.S. growth and inflation.

"The dollar and bonds have been trading in lockstep," said

Ellis Phifer, senior market strategist at Raymond James in Memphis, Tennessee. "There are still concerns spending will increase and more debt supply will be on its way."

The , a gauge of the greenback's value against a basket of currencies, was up 0.15 percent at 103.29 after hitting 103.65, its highest since December 2002.

The benchmark 10-year Treasury yield was up more than 4 basis points at 2.583 percent.

The dollar rebounded against the yen after the Bank of Japan left monetary policy unchanged as expected, supporting the view that it is the major central bank furthest away from normalizing its monetary policy.

Dollar index to surge 10% higher: Expert

The BOJ on Tuesday affirmed its twin targets of minus 0.10 percent interest on some excess reserves and a zero percent 10-year government bond yield.

The greenback was up 0.63 percent at 117.81 , within sight of a 10-1/2-month high of 118.66 yen set last week.

On Monday, the yen jumped on safe-haven demand following deadly attacks in Turkey and Germany.

The Turkish lira gained 0.4 percent at 3.5174 liras per dollar, reversing about half of Monday's loss resulting from the killing of a Russian ambassador in Ankara.

The euro fell 0.11 percent to $1.0391 after hitting $1.0350, its weakest versus the greenback since January 2003, Reuters data showed.