* Dollar index reaches two-week highs
* Commodity currencies hit hard, Argentine peso tumbles
* BOJ seen holding off on any additional stimulus
By Ian Chua
SYDNEY, Dec 18 (Reuters) - The U.S. dollar stood at its highest in two weeks against a basket of currencies early on Friday, having made a decisive move a day after the Federal Reserve delivered a long-awaited hike in interest rates.
Commodity currencies were hardest hit as the firmer greenback took a toll on a range of commodities from oil to base metals and gold. The Canadian dollar was now close to a 12-year low, having come within a whisker of C$1.40 per USD.
Argentina’s peso plunged more than 26.5 percent on Thursday as a new government floated the currency as part of a slew of free-market reforms.
The U.S. dollar index was flirting with 99.000, holding onto a 1.2 percent gain on Thursday - its biggest rise in over a month. The greenback rose broadly on Wednesday after the Fed ended months of speculation by lifting its benchmark rate off zero.
“The USD can make new cyclical highs in the near term as US interest rate expectations adjust higher,” said Elias Haddad, senior currency strategist at Commonwealth Bank.
The Fed’s own projections were for 100 basis points of hikes in 2016. By contrast, the futures market was only discounting just over 50 basis points of tightening.
“We believe the FOMC’s normalisation process will be gradual and expect 75 bps of rate hikes in 2016 bringing the upper-bound of the Fed Funds target range to 1.25 percent. This will support the USD.”
Against the yen, the dollar reached its highest in over a week at 122.88 before stepping back to 122.51. The euro was back at $1.0834, off this week’s peak of $1.1060.
Along with their Canadian peer, the Antipodean currencies fared badly. The Australian dollar briefly dipped below 71 U.S. cents for the first time in a month, before edging back to $0.7123. Its New Zealand counterpart fell to its lowest in over a week at $0.6688.
With the Fed out of the way, the focus on Friday will be on the Bank of Japan (BOJ), though the central bank is expected to hold off on any additional stimulus in its final policy review of the year.
But BOJ policymakers are still likely to debate lingering risks to the economic outlook that could warrant additional easing in coming months. (Editing by Tom Brown)