The dollar has surged 13% against the euro and 20% against the yen this year as it scorches every currency in sight

• The US dollar has surged dramatically against major currencies thanks to Fed hikes and economic worries.
• For the year, the greenback was up 13% vs. the euro, 15% vs. the pound, and 20% vs. Japan's yen on Wednesday.

The US dollar has surged dramatically against the world's biggest currencies this year as the Federal Reserve has hiked interest rates and doubts have grown about the global economy.

The greenback was up 13% against the euro, 15% against the British pound, and 20% against Japan's yen for the year as of Wednesday, Bloomberg data showed.

The US currency has surged to its highest level since 2002, as measured by the dollar index, which was up slightly to around 110.3 Wednesday. The index has risen 15% this year, putting it on track for its biggest annual rise since 1981, according to Bloomberg data.

Underpinning the dollar's seemingly unstoppable surge is the Federal Reserve. To dampen rampant inflation, the US central bank has embarked on the most aggressive interest-rate hikes since the 1980s. That's made dollar assets look much more attractive to global investors.

"King dollar's scorched-earth ascent to a fresh 20-year peak has clobbered broad swathes of global financial markets," said Han Tan, chief market analyst at trading platform Exinity.

"The greenback has clearly fed off the palpable anguish surrounding a Fed that's now persistently ultra-aggressive in its battle against multidecade high inflation."

The Fed has raised interest rates by 2.25 percentage points since March, with the target range now standing at between 2.25% and 2.5%. Traders expect the Fed to keep hiking until March 2023.

A global slowdown in growth has also caused many investors to flock towards so-called safe-haven assets, of which the dollar is one.

Meanwhile, Europe's energy crisis — which stems from Russia's invasion of Ukraine — has triggered a sharp selloff in both the euro and the UK pound.

The euro tumbled below $0.99 for the first time in two decades this week, while sterling has dropped to trade at its lowest levels since 1985.

The dollar's dramatic rise is heaping the pressure on policymakers in Europe, the UK, and Japan. A weak currency makes imports more expensive, potentially fuelling more inflation, and incentivizes central banks to follow the Fed with aggressive rate hikes.

Only a few of the world's so-called commodities currencies have risen this year, as oil and metals prices have boomed. Brazil's real was up 6.2% against the dollar for the year as of Wednesday, for one.