Dollar extends gains in Asia as Fed heads for rate hike

Hong Kong : The dollar built on the previous day's gains Thursday after the Federal Reserve unveiled plans to wind down its crisis-era stimulus and hinted at another interest rate hike before the end of the year.

Fed boss Janet Yellen said the world's biggest economy was "performing well" while it emerged after a closely watched meeting that most members of the policy board wanted to lift borrowing costs by December.

The central bank also announced it would next month begin cutting back on its holdings of bonds and other assets built up as part of a scheme to keep rates low and steer the economy through the financial meltdown.

Yellen said policymakers would react accordingly to any negative impacts on the economy, adding that persistently low inflation would likely come to an end.

She also said if prices rose too quickly the bank would be able to lift rates quicker.

"It doesn't get any more brazenly hawkish from Dr Yellen, who along with the majority of her colleagues are clearly in the December rate hike camp and the markets are reacting to this news," said Stephen Innes, head of Asia-Pacific trading at OANDA.

The dollar surged in New York to 112.15 yen from 111.50 yen earlier in Asia, while the euro sank from around $1.20 to below $1.19. The pound dropped below $1.35.

And in Asia the greenback continued to advance, with other higher-yielding currencies including the Australian and Canadian dollars, South Korean won and Indonesia's rupiah all well down.