NEW YORK (Reuters) - The U.S. dollar posted its biggest daily gain against major currencies since early October on Wednesday after the Federal Reserve signaled it was on track to hike interest rates sometime next year.
The dollar hit its highest levels against the euro and Swissfranc in over a week after the Fed altered a pledge to keep rates near zero for a “considerable time” in a show of confidence in the U.S. economy.
“Markets are taking the dollar higher, as they should be, because the Fed is on track to hike rates in 2015,” said Win Thin, currency strategist at Brown Brothers Harriman in New York.
Any rate increases would boost the greenback by driving investment flows into the United States.
A comment from Fed Chair Janet Yellen at a press conference that the Fed’s policymaking committee considered it unlikely to begin the normalization process for “at least the next couple of meetings” was viewed as a sign the central bank could hike rates sooner.
The comment suggested the possibility of a hike by as soon as April 2015, said Richard Cochinos, head of Americas G10 FX strategy at Citi in New York.
The euro fell to its lowest level against the dollar since Dec. 9, at $1.2320, after Yellen’s comments. The dollar also rose to its highest level against the Swiss franc since Dec. 9, at 0.9745 franc.
The euro had earlier weakened after a European Central Bank policymaker signaled the likelihood of the central bank purchasing government bonds. [ID:nF9N0PT00K]
The dollar fell against the rouble, however, on the view that the Russian currency’s collapse may have gone too far.
The dollar was last up 2.19 percent against the yen at 118.60 yen after hitting a session high of 118.89 yen. The dollar was last down 12.08 percent against the rouble to trade at 60.15 roubles.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, was last up 0.99 percent at 88.995 to post its biggest daily gain since Oct. 3.
On Wall Street, the benchmark S&P 500 stock index closed up 2.04 percent.
Reporting by Sam Forgione; Editing by Meredith Mazzilli, Lisa Shumaker and Diane Craft