* Dollar hits two-month high vs sterling to $1.2201
* Euro hits one-week low vs dollar of $1.0385
* Higher expected U.S. growth boosts dollar
* Dollar on track to gain nearly 5 pct for year
By Sam Forgione
NEW YORK, Dec 28 The U.S. dollar hit its highest
level in two months against the sterling on Wednesday on
concerns over next year's Brexit negotiations, while
expectations of higher U.S. economic growth also underpinned the
Sterling fell as much as 0.5 percent to a session low of
$1.2201, its weakest since Oct. 31. Britain faces
uncertainty next year over Brexit negotiations. In October,
Prime Minister Theresa May said she would trigger the process to
leave the EU by the end of March.
Expectations that U.S. President-elect Donald Trump's
incoming administration would boost U.S. growth through fiscal
stimulus also continued to bolster the dollar.
The dollar index, which measures the greenback against a
basket of six major rivals, has gained 4.9 percent this year.
All those gains have come after the Nov. 8 U.S. election.
"This is just a continuation of the trend" of dollar
strength, said Axel Merk, president and chief investment officer
of Palo Alto, California-based Merk Investments. "People are
trying to be aligned with the winning positions."
Merk said the challenges in Britain were not going away
given the Brexit talks, and that "doesn't bode well for
The euro fell about 0.7 percent against the dollar to a
one-week low of $1.0385, while the dollar rose about 0.4
percent against the yen to a six-day high of 117.81 yen.
The dollar index was last up 0.43 percent at 103.450 after
hitting an eight-day high of 103.560 earlier. That remained
below a 14-year peak of 103.650 struck Dec. 20.
Some analysts said another source of euro weakness was the
rise in the European Central Bank's estimates of how much
additional capital will be needed to prop up Italian bank Monte
dei Paschi di Siena.
"Our case is that there's probably a bit more room for (the
dollar) to run," said Dominic Bunning, a strategist with HSBC in
The euro hit its one-week low against the dollar even though
contracts to buy previously owned U.S. homes fell in November to
the lowest in nearly a year, according to National Association
of Realtors data.
Merk of Merk Investments said the theme of dollar strength
continued despite the weak data, while thin trading volumes
could be leading to unpredictable moves with many traders on
(Reporting by Sam Forgione; Additional reporting by Patrick
Graham in London; Editing by David Gregorio)