Investing.com - The dollar rose to fresh 14-year highs against a basket of the other major currencies on Tuesday after data showing an index of U.S. factory activity rose to a two-year high in December.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, hit highs of 103.81 immediately following the report, the most since December 2002 and was last at 103.41, up 1.02% for the day.
The Institute for Supply Management said its index of manufacturing activity rose to 54.7 from 53.2 in November
The reading was the highest since December 2014 and easily exceeded economists’ expectation of a level of 53.6.
Another report showed that U.S. construction spending hit a ten-and-a-half-year high in November, boosting the outlook for fourth-quarter growth.
The dollar had weakened on Friday as traders took profits in the wake of a late year rally, before resuming its climb higher in the first full trading day of 2017 on Tuesday.
The greenback has strengthened broadly on the back of expectations for a faster pace of rate hikes from the Federal Reserve and increased fiscal spending under the incoming Trump administration.
The euro extended losses against the greenback in the wake of the manufacturing report, with EUR/USD touching lows of 1.0341, the weakest level since December 2002.
The dollar was also higher against the yen, with USD/JPY up 0.35% at 117.92, not far from the 10-month highs of 118.65 set on December 15.
Sterling was weaker, with GBP/USD trading at 1.2280 despite data showing that UK manufacturing activity rose to a two-and-a-half-year high in December.
The data indicated that UK factories ended 2016 on a strong note despite June’s Brexit vote.
Elsewhere, the pound was near two-week highs against the euro, with EUR/GBP down 0.31% to 0.8487.
The Australian dollar remained supported, with AUD/USD up 0.57% to 0.7227 after data showing that China's factory activity accelerated in December, boosted by stronger domestic demand.
The Caixin manufacturing index rose to 51.9 from 50.9 in November, well above forecasts for a reading of 50.7.