* Dollar near 14-yr high vs euro, basket of major currencies
* Dollar/yen near 10 1/2-month peak after BOJ
* Markets pin hopes on Trump fiscal policy for now
(Updates prices, comment)
By Hideyuki Sano and Yuzuha Oka
TOKYO, Dec 21 The dollar hovered near a 14-year
high against the euro on Wednesday, supported by expectations of
U.S. interest rates rising more rapidly during the incoming
In thin trading ahead of year-end holidays, the euro
last stood at $1.0413 after slipping below $1.0352 on Tuesday, a
level last seen in January 2003.
The weak euro helped to push the dollar's trade-weighted
index against a basket of six major currencies to
touch 103.65, also a 14-year high. The index was last at 103.30.
"The dollar looks pretty strong. Although there are no fresh
trading factors as we head into Christmas, we see dollar buying
whenever the currency slips," said Shinichiro Kadota, chief
forex strategist at Barclays.
"We haven't seen anything that could change its Trump-driven
rally," he added.
The dollar index has risen 5.8 percent since Trump was
elected. He has pledged big tax cuts and spending increases and
threatened to impose tariffs on imports from China and Mexico.
Investors rushed to U.S. assets as they bet his expansionary
fiscal policy will boost U.S. growth, inflation and interest
The dollar was at 117.67 yen, coming within reach of
its 10 1/2-month high of 118.66 touched on Dec 15.
Selling in the yen gathered pace after the Bank of Japan
maintained its policy settings on Tuesday and when Governor
Haruhiko Kuroda doused talk the BOJ might consider raising the
target for the 10-year bond yield next year.
Kuroda also said he did not see recent yen falls as a
problem for Japan's economy, noting that a weak currency helps
accelerate inflation by boosting import costs.
"The markets took Kuroda's comments as rather tolerant to
the weaker yen," said Yunosuke Ikeda, chief FX strategist at
Nomura Holdings in Tokyo.
"Kuroda's remark encouraged the yen selling, as well as the
widening U.S.-Japan interest rate differentials. Investors tend
to make money from carry trade when markets are relatively quiet
ahead of Christmas holidays," added Ikeda.
With central banks in Europe and Japan committing to very
loose monetary policies, investors continued to pile into the
The Federal Reserve, which hiked rates last week, signalled
three more increases next year, versus its previous projection
U.S. Treasury yields rose after Fed Chair Janet Yellen's
upbeat labour market comments on Monday reinforced convictions
of more frequent U.S. interest rate hikes next year.
The benchmark 10-year Treasury yield last stood
at 2.566 percent, within the sight of a 27-month-high of 2.641
percent hit last week.
The British pound fell to one-month low of $1.2313
on Monday, pressured by renewed uncertainty over the process by
which Britain will leave the European Union.
Looking ahead, traders are casting an eye on Italy's
troubled bank Monte dei Paschi di Siena, which needs
to raise 5 billion euros ($5.2 billion) by the end of the year
to avoid being wound up by the European Central Bank.
(Reporting by Yuzuha Oka; Editing by Shri Navaratnam and Eric