The dollar raced to new 28-month highs against the euro Friday, as traders bet the European Central Bank can no longer afford to dither on massive quantitative easing.
The ECB has been reluctant to offer additional stimulus, but the threat of a crippling deflationary spiral is likely to spur action early next year.
Meanwhile, the Federal Reserve is almost universally expected to hike interest rates in 2015. The Fed earlier this week said it will be “patient” before tightening, hinting that the first rate hike will come sometime in the middle of the year.
The dollar rose to $1.222 versus the euro, having picked up about 2 cents this week.
Strong gains took the dollar to Y119.25 versus the yen, edging back near a 7-year peak of Y122 set a few weeks ago.
That’s after the Bank of Japan decided to leave its monetary stimulus unchanged in order to assess the impact of recent measures.
The unchanged stance came despite falling oil prices posing a threat to the central bank’s 2 percent inflation target.
The buck lost ground against the ruble after epic gains earlier in the week. The buck slipped 4 percent today as traders bet that Russia might stave off an economic collapse.