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[NEW YORK] The US dollar climbed to a near 14-year high against a basket of currencies on Wednesday, even as analysts cautioned the greenback is vulnerable to a letdown from its surge tied to bets on pro-growth policies under US President-elect Donald Trump.
The euro deteriorated to its weakest level in almost a year against the greenback. Mr Trump's stunning victory on Nov 8 has raised concerns about a rising tide of potentially destabilising wins for populist candidates and issues on ballots across Europe in the coming year.
"The market has gone a bit too far ahead of itself. It looks vulnerable for a short-term pullback," said Mazen Issa, senior currency strategist at TD Securities in New York.
Weaker-than-forecast data on US producer prices and industrial production on Wednesday pinned Treasury yields near their 10-month peaks and put a cap on the US dollar.
Two-year Treasury yield was little changed at 1.005 per cent, while 10-year yield was down 1.5 basis points at 2.223 per cent.
The US dollar index reached 100.57, which was its highest since April 2003 before retreating to 100.42, up 0.2 per cent on the day. It has risen 3.5 per cent over eight days, which would be the biggest such increase since May 2015.
While traders have increased their expectations on the Federal Reserve raising interest rates at its Dec 13-14 policy meeting, the US dollar rally may cause Fed policy-makers to reconsider such a move because of its repercussions on US exports, analysts said.
"It's reaching its limit. It could feed back negatively on US growth," Joachim Fels, global economic adviser at Pimco, said at the Reuters Global Investment Outlook Summit in New York.
On Thursday, Fed Chair Janet Yellen will testify before the Congress' Joint Economic Committee at 10am EST (1500 GMT) where she might raise concerns about the US dollar's surge.
"Anything (Yellen says) that expresses caution won't be taken lightly by markets," TD's Mr Issa said.
US interest rates futures implied traders saw about a 91 per cent chance the Fed would raise the target range on policy rates to 0.50-0.75 per cent next month, CME Group's FedWatch showed.
Pressured by traders' conviction on a US rate hike and political worries about Europe, the euro fell below US$1.07 for the first time since the start of Dec 2015. It was down 0.4 per cent at US$1.0679.
The US dollar ended little changed at 109.15 yen after rising to 109.75 yen, its highest since June 1.