(Updates after the start of European trading)
* Euro skids to 14-year low close to $1.04
* Dollar hits 14-year high after Fed ups rate hike
* Dollar/yen on track for best quarter in over 20 yrs
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, Dec 15 The euro skidded over 1 percent
to its lowest levels in 14 years on Thursday, as the dollar
soared across the board, opening up the possibility that the
single currency could reach parity with the greenback in the
The single currency's break below its 2015 lows came after
the U.S. Federal Reserve hinted that interest rates could rise
faster in 2017 than investors had been anticipating.
The euro had managed to stay above those levels in Asian and
early European trading but took another lurch lower as dealers
arrived at their desks in New York. Just after 1200 GMT, it hit
as low as $1.04055, down 1.2 percent on the day, leaving
it around 2.5 cents lower than before the Fed statement late on
A 25-basis point rate hike also announced by the Fed had
been widely expected by financial markets; it was its signal
that rates were likely to rise three times in 2017 - up from
twice at the Fed's September meeting - that investors latched
onto and drove the greenback higher. tmsnrt.rs/2gsUVwB
"This has been something that the market hadn't expected. We
hadn't expected a hawkish message from the Fed and we hadn't
expected this kind of dollar strength either," said Barclays
currency strategist Hamish Pepper, in London.
"Our thesis at the beginning of the week was that the Fed
would come and go and it would be a relatively priced event In
the context of investors with already long dollar positions, and
noting that the dollar is already quite expensive and we're
going into year end, it seemed that now was a good time to
reduce some dollar longs. But we've seen the opposite of that."
Barclays expects the euro to reach parity with the dollar by
the third quarter of 2017 and then to fall below $1, while JP
Morgan Asset Management reckons the two currencies will become
equal in the first quarter of next year.
Against the yen, the greenback surged as much as 1.5 percent
to hit 118.66 yen, its strongest since February. The
dollar is on track for easily its strongest quarter against the
Japanese currency in over 20 years, after an almost 17 percent
climb since the start of October.
Against a basket of major currencies the dollar rose 1.3
percent to a 14-year high of 103.16.
The Fed's policy meeting was the first since the U.S.
election victory of Donald Trump, who investors expect to drive
up inflation and boost growth with a programme of huge fiscal
At least five of 17 Fed policymakers appeared to have
boosted their interest rate outlook since September, according
to the new "dot plot" of rate projections. But not all traders
and analysts viewed the Fed's statement as hawkish.
"The macroeconomic forecast is unchanged...and the dots have
shifted only very slightly - the median dots went up by 25 basis
points but the average only went up 6 basis points," said UBS
Wealth Management's head of currency strategy, Thomas Flury, in
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Abhinav Ramnarayan in London and
Shinishi Saoshiro in Tokyo)