The cost of money is rising not only in the U.S. but around the world, courtesy of global central banks hiking rates to curb inflationary pressures. At the moment, the dollar remains the big winner at the rate-hiking game, but next year it will likely be a different story.

On Thursday, it was the turn of the European Central Bank, which raised its key rate a quarter point to 2.25%, the first such move in five years. Nascent signs of a pickup in economic activity in the eurozone were enough to convince the ECB to move rates higher. The widely expected decision, however, didn't prop up the euro, as ECB president Jean-Claude Trichet downplayed market expectations for further rate hikes.

"We are not engaging ex ante in a series of increases," he told reporters after the ECB decision.

In recent action, the euro was trading at $1.1712 compared with $1.1791 late Wednesday.

The dollar was supported by strong U.S. economic reports, namely the Institute of Supply Management's November manufacturing survey. The ISM index dropped in November but was stronger than economists expected. The survey also showed a pickup in hiring by manufacturers.

Strong U.S. economic data, including Wednesday's news that the GDP grew 4.3% in the third quarter, all but confirmed expectations that the Federal Reserve will continue to lift rates at a measured pace of quarter-point increments.

The Fed is widely expected to hike its key rate to 4.25% on Dec. 13 and to continue hiking in early 2006.

The dollar also rose against the yen, going above 120 yen for the first time in two years. In recent action the dollar was trading at 120.22 yen vs. 119.82 yen Wednesday.

Earlier this year, the Bank of Japan made moves towards abandoning its four-year-old zero-interest-rate policy. But in recent months, and again on Wednesday, the BOJ also downplayed expectations of how quickly it will get there.

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