NEW YORK (MarketWatch) — The U.S. dollar ended its strongest year since 2005 with gains versus major rivals as investors penciled in further strength in the U.S. economy and diverging monetary policy paths between a more hawkish Federal Reserve and dovish European and Japanese central banks.

The benchmark DXY, +0.03% , which measures the greenback against a basket of six rival currencies, traded at 90.269 in late North American trade, up 0.3% from Wednesday and by 12.8% since the end of 2013.

The wider WSJ Dollar Index BUXX, +0.17% rose 0.38 point on Wednesday, to 83.04.

The euro EURUSD, -0.06% is down around 12% versus the dollar in 2014, which is also the biggest drop since 2005. The U.S. currency has advanced 13.8% against the yen USDJPY, -0.15% .

In Wednesday’s trade, the euro slipped to $1.2100, compared with $1.2155 on Tuesday, and putting it at its lowest level since mid-2012. The yen weakened; the dollar bought ¥119.79, compared with ¥119.56 late Tuesday.

The euro has been pressured on expectations the European Central Bank will move in early 2015 to implement full-blown quantitative easing in an effort to fight off the prospect of outright deflation. Renewed political turmoil in Greece, which faces snap elections in January, is also weighing on the shared currency.

“While the key driver of our EURUSD forecast for sustained depreciation to $1.07 in Q4 2015 is diverging monetary policies, given our expectation for the announcement of QE by the ECB at its January 2015 meeting, we think this political uncertainty should provide another deterrent to euro ownership,” wrote Francois Cabau, strategist at Barclays.

Overall analysts are bullish on the dollar going into 2015, as a strong improvement in the U.S. economy is seen as pushing the Federal Reserve closer toward raising interest rates. Additionally, the European Central Bank and the Bank of Japan are expected to keep monetary policy ultra-loose next year, which should weaken their currencies against the dollar.

In other currencies, the pound GBPUSD, -0.42% rose to $1.5578, from $1.5555 on Tuesday, but lost 5.9% against the U.S. unit for the year.