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Dollar Advances as Policy Divergence Prompts Bets Against Euro

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The pause in the dollar rally proved to be short-lived. Speculation on when the Federal Reserve will raise interest rates as its European peer extends stimulus is fueling a perception that the only way is up.

The U.S. currency advanced to a 12-year high against the euro, rebounding from a drop on Thursday that was the most since Feb. 5. A dollar gauge against its major peers has jumped 8.1 percent this year, set for the biggest quarterly gain since 2008. Even after analysts upgraded their forecasts this week, the dollar is still trading above the median prediction versus the euro for the end of 2015.