* Dollar hits loftiest levels since 2003 vs euro, currency basket
* Yen plumbs weakest levels since February
* Sterling wallows at three-week lows as BoE holds steady
TOKYO, Dec 16 (Reuters) - The dollar stood tall on Friday, on track for hefty gains for the week, after scaling 14-year highs against the euro as well as a broader basket of currencies on expectations of more U.S. Federal Reserve interest rate hikes.
The dollar has been on a tear since the Nov. 8 election of Donald Trump, whose administration is expected to embark on inflation-stoking stimulus policies. On Wednesday, the Fed raised interest rates by 25 basis point as widely expected, and also tipped three hikes instead of two in 2017.
Against its Japanese counterpart, the dollar rose 0.1 percent to 118.33 yen, after touching 118.66 yen overnight, its highest since February. It was up 2.6 percent for the week.
“Toward the year-end, it’s 120, here we come!” said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
“There are some Japanese commercial accounts that were caught by surprise by the dollar’s rise after Trump’s election, and still have cover their dollar positions, and are now recalculating their internal expectations for dollar/yen for next year,” he said.
U.S. inflation data released on Thursday showed consumer prices moderated in November, but the underlying trend continued to point to firming inflation pressures amid rising rents, which could support more interest rate increases from the Federal Reserve next year.
Fed funds futures showed investors were pricing in a 40 percent chance for tightening by the Fed’s March meeting, and a 50 percent probability for a May rate increase.
The dollar index, which tracks the greenback against a basket of six major rival currencies, rose 0.2 percent to 103.210, after surging to 103.56 on Thursday. It was up 1.6 percent for the week.
The euro edged down 0.1 percent to $1.0408, after plumbing $1.0366 on Thursday. It was down 1.4 percent for the week.
Sterling licked its wounds after sinking to a three-week low against the dollar overnight. It was slightly lower at $1.2415 after slipping as low as $1.2378, and was down 1.3 percent for the week.
The Bank of England said on Thursday that sterling’s strong performance over the past month could soften an expected surge in British inflation next year, as its policymakers voted unanimously to keep interest rates unchanged at a record low 0.25 percent.
BoE officials noted sterling had appreciated by over 6 percent since its latest forecasts in November.
Reporting by Tokyo markets team; Editing by Richard Pullin