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The dollar hasn't had this good a year since the Berlin Wall fell, Taylor Swift was born and the World Wide Web was conceived.
The greenback is set to gain against all of its 31 major counterparts in 2014 for the first time in data going back to 1989, buoyed by an improving economy and the Federal Reserve's plan to raise interest rates next year. The yen and euro tumbled as Japanese and European central banks embraced monetary stimulus to ward off deflation. The rouble plunged the most among the major currencies amid turmoil in eastern Europe and plunging oil prices.
"Not one of them is up against the dollar," Robert Sinche, a strategist at Amherst Pierpont Securities LLC in Stamford, Connecticut, said on Friday by phone. "We got a big shift in US interest-rate expectations."
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, has risen 11 per cent this year in New York to 1,130.61, set for the biggest annual gain in data starting in 2004.
The dollar has gained 14 per cent this year to 120.31 yen, a third straight annual advance. It rose 13 per cent to $1.2183 against the euro, the biggest gain since 2005. The 18-nation shared currency added 1.3 per cent to 146.60 yen.
Rouble plunge
The rouble plunged 39 per cent versus the dollar this year, followed by drops of 24 per cent by the Argentine peso and 19 per cent by the Norwegian krone. All other currencies lost at least 1.9 per cent except the Hong Kong dollar, which is pegged to the greenback and declined 0.08 per cent.
The rouble's depreciation puts it on course for the worst year since 1998, when Russia defaulted on local debt.
Highlighting the risks facing Russia as it contends with sanctions over the conflict in Ukraine and slumping oil, Standard & Poor's said December 23 there's at least a 50 per cent chance it will cut the sovereign's credit rating to below investment grade within 90 days. The economy of the world's largest energy exporter is set to shrink 1.4 per cent next year, the average of 46 analyst estimates compiled by Bloomberg shows.
"As long as oil remains at these levels, the devaluation risk will persist," Vadim Bit-Avragim, a money manager at Kapital Asset Management LLC in Moscow, said on Friday by e- mail.
Brent, the oil grade traders use to price Russia's main export blend, slumped 46 per cent this year.
Policy divergence
The yen has depreciated more than 30 per cent since Shinzo Abe was elected prime minister in December 2012 on a promise of providing unlimited stimulus to drag the nation out of two decades of stagnation. He was re-elected by landslide on December 14 in a mandate to continue those policies. The euro fell this year as European Central Bank President Mario Draghi worked to win consensus for sovereign-bond purchases by the central bank to revive inflation. Policy makers meet January 22.
In contrast, the Fed ended its bond-buying under the quantitative-easing strategy in October and Chair Janet Yellen indicated after a policy meeting on December 17 that the US central bank was moving toward raising interest rates next year. The main rate has been held at zero to 0.25 percent since 2008.
Yellen, who said after the meeting that Russia's currency crisis has had limited effect on the world's biggest economy, said "the committee considers it unlikely to begin the normalization process for at least the next couple of meetings."
'Tremendous backdrop'
The Federal Open Market Committee's next scheduled decisions are January 28, March 18 and April 29.
"Things change quickly, and if they see a rapid rebound in the credit market and an acceleration on the payroll side, they want to have the option to raise rates significantly by mid- year," Robert Tipp, chief investment strategist in Newark, New Jersey for Prudential Financial Inc.'s fixed-income division, said on December 20. "It's been a tremendous backdrop for the dollar."
The greenback will extend gains against most major currencies in 2015, according to a Bloomberg survey of strategists. Argentina's peso is forecast to lead declines, tumbling 29 per cent, followed by almost 6 per cent drops by the New Zealand dollar and Denmark's krone. The yen and euro are predicted to weaken at least 3 per cent.
Yellen is "really trying to say there's a lot of volatility out there, but it's not having a dramatic impact on the outlook of US," Kevin Hebner, a foreign-exchange strategist at JPMorgan Chase & Co, said by phone on December 19. The process of the market adjusting to the Fed's rate-rise projections "is going to get the dollar appreciating, especially against the euro and yen."
