Thursday September 18, 2014 - 01:44:19 GMT
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Reuters - www.reuters.com
FOREX-Dollar rallies as markets latch onto 'hawkish' Fed projections
* Dollar index jumps to highest in over four years
* Bulls latch onto new higher Fed rate projections
* Ignore pledge to keep rates low for 'considerable time'
* Scotland's independence vote next focus
By Ian Chua
SYDNEY, Sept 18 (Reuters) - The dollar rose to its highest in over four years against a basket of currencies on Thursday after the Federal Reserve's guidance on interest rates highlighted the diverging pathways between the United States and other rich nations.
The dollar index surged to 84.814, reaching a high not seen since July 2010, and bringing into view its 2010 peak of 88.708. It last traded at 84.782.
Against the yen, the greenback raced to a fresh six-year high of 108.69, while the euro slumped to a 14-month trough of $1.2834.
The Fed confirmed that its bond-buying stimulus program would end next month, and its new projections suggested some officials saw the risk that rates might have to rise at a faster pace when the bank eventually starts tightening.
For the end of next year, the median projection was 1.375 percent, compared to 1.125 percent in June, while the end-2016 projection moved up to 2.875 percent from 2.50 percent.
"The upward revisions to the rate outlook have seen the USD strengthen this morning," said Spiros Papadopoulos, senior economist at National Australia Bank.
Fed Chair Janet Yellen tried to play down the shift in a news conference after the statement was released, saying there is "relatively little upward movement in the (rate) path."
The Fed's policy review was one of the most anticipated events of the week, the other being the referendum on Scotland's independence.
Just hours before Scots vote on Thursday, a poll by Survation showed support for staying in the United Kingdom is at 53 percent.
Still, the threat of a break-up of the United Kingdom is keeping sterling on edge. It last traded at $1.6260, having dropped more than 3 percent earlier in the month to as low as $1.6052.
Voting ends at 2100 GMT on Thursday, with exit polls expected shortly after, giving Asian investors the first chance to react very early on Friday.
Commodity currencies were hit hard overnight with the Australian dollar breaking below a key support level at $0.8983 to reach a six-month low of $0.8951.
The Aussie could come under further pressure if China house prices, due around 0130 GMT, fan jitters about the slowing property market.
Its kiwi counterpart slumped to seven-month lows of $0.8078 and steadied just off that level even after data showed the New Zealand economy grew at an enviable annual pace of 3.9 percent in the second quarter, roughly in line with expectations. (Editing by Richard Pullin)
© Thomson Reuters 2014. All rights reserved
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