* Dollar boosted after Fed ups 2017 rate hike projections
* Dollar/yen hits 10-mth high, euro/dollar near 21-mth low
* Focus on if further rise in USD prompts warning by
By Shinichi Saoshiro
TOKYO, Dec 15 The dollar rose to a 14-year peak
against a basket of major currencies on Thursday after the
Federal Reserve boosted the number of projected interest rate
hikes for 2017, rejuvenating the month-long Trump rally and
knocking emerging market currencies.
The Fed's 25 basis-point interest rate increase on Wednesday
was widely anticipated by financial markets though they appeared
to have been caught out by the central bank signal of three
hikes in 2017, up from around two flagged at its September
policy meeting. tmsnrt.rs/2gsUVwB
The relatively hawkish Fed stance came as U.S.
president-elect Donald Trump takes over with promises to boost
growth through tax cuts, spending and deregulation.
"The rate hike projections for 2017 being increased to three
shows that Fed's board is having to factor in the impact of
Trump's policies," said Junichi Ishikawa, senior FX strategist
at IG Securities in Tokyo.
The dollar index extended its overnight rally and was up 0.5
percent at 102.270. It touched 102.620, its highest since
January 2003. The euro was down 0.2 percent at $1.0512
after sliding to $1.0468, a trough not seen in 21 months.
The greenback set a 10-month high of 117.860 yen
early on Thursday and was last up 0.3 percent at 117.390.
The allure of higher U.S. yields took a predictable toll on
emerging Asian currencies.
The Chinese yuan fell to its lowest levels in
more than eight years, after the central bank set the daily
mid-point at the lowest since mid 2008. Low-yielding currencies
such as the Singapore dollar and Korean won came
under pressure, as investors grew anxious over the risk of
capital being sucked out of regional economies toward
The Singapore dollar fell near its January low and
is on the verge of slipping to its lowest September 2009.
With the Fed out of the way, analysts say the Trump factor
remains an unknown for markets, at least for now.
"Until clear signs emerge that Trump's policies are not
feasible, it is difficult swimming against the tide and take a
contrarian stance on the dollar," said Koji Fukaya, president of
FPG Securities in Tokyo.
BOOST FROM YIELDS
Treasury yields, a key driver of the dollar's Trump rally,
have been climbing relentlessly since early November on
prospects of the new administration will embark on reflationary
policies through massive fiscal spending.
Following the Fed's move, the 10-year Treasury note
yield vaulted to 2.587 percent, its highest level
since September 2014, while Wall Street shares fell the most in
two months overnight.
"The focus now falls on U.S. equities and whether they can
withstand the surging dollar and Treasury yields. If not, we
could see the Trump camp warn against the appreciation of the
dollar," Ishikawa at IG Securities said.
Analysts said Tokyo may also step up verbal warnings
against any excessive yen declines versus the dollar.
"I doubt that Fed can actually raise interest rates three
times next year. Last year they planned to have four rate hikes,
but ended up raising only once," said Daisuke Karakama, chief
market economist at Mizuho Bank, who reckons the stronger
greenback will eventually hurt the U.S. economy.
The Australian dollar was up 0.3 percent at $0.7426
, trimming some losses after falling 1.2 percent the
previous day against the broadly stronger dollar.
The New Zealand dollar touched a 10-day low of $0.7090
The antipodean currencies, however, managed to gain against
the Japanese yen thanks to higher domestic yields.
The Aussie touched an 11-month high of 87.27 yen
and the kiwi marked an 18-month peak of 83.56 yen.
Sterling was 0.1 percent lower at $1.2553 after
hitting a two-week low of $1.2515.
(Additional reporting by Yuzuha Oka in Tokyo; Editing by Sam
Holmes & Shri Navaratnam)