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* Dollar index hits highest since December 2002
* Euro hits lowest vs dollar since December 2002
* Dollar hits nearly 3-week high vs yen, Swiss franc
* Solid U.S. manufacturing data reinforces that economy strengthening
By Dion Rabouin
NEW YORK, Jan 3 (Reuters) - The U.S. dollar rose to its highest in 14 years against the euro and a basket of major currencies on Tuesday after data showed solid growth in U.S. manufacturing.
The dollar index rose to 103.820, its highest level since December 2002 after data showed U.S. factory activity accelerated to a two-year high last month and construction spending rose to its highest in 10-1/2 years in November.
The index, which tracks the greenback against a basket of world currencies, appeared set for its biggest one-day percentage rise in more than two weeks in 2017’s first full day of trading.
“Job growth appears to be picking up, orders are picking up quite strongly, prices are increasing quite strongly as well,” said Shaun Osborne, currency strategist at Scotia Capital in Toronto. “That suggests the (Federal Reserve) is going to have to remain active in this kind of environment. So this on the whole is a generally constructive set of data for the dollar here in a time of the year where typically the dollar does quite well.”
The growing consistency of strong U.S. economic reports has led to expectations of increased tightening of U.S. interest rates from the Fed and rosier outlooks on the overall health of the world’s largest economy, analysts said.
That has helped elevate the dollar to its strongest in nearly a decade and a half as investors gear up for expected cuts in regulations and tax rates, as well as increased fiscal spending from the administration of President-elect Donald Trump.
The euro fell to a 14-year low against the dollar, dropping to $1.0342 after the data’s release.
The dollar gained against the yen as well, reaching 118.60 yen, its highest since Dec. 15 and just a hair below its highest point since February as a holiday in Japan thinned Asian trading.
The greenback also rose against the Swiss franc to its highest since Dec. 15.
“Even though there’s a lot of doubt and uncertainty and a lot of weird rhetoric in the U.S., market participants are giving the benefit of the doubt to an administration that is going to be very pro-business,” said Juan Perez, currency strategist at Tempus Inc in Washington. (Reporting by Dion Rabouin; Editing by Dan Grebler)