LONDON- The U.S. dollar surged to its highest levels in two decades on Thursday propelled by widespread weakness in its major rivals, such as the yen and the euro.

Against a basket of major currencies, the dollar index rose 0.8% to 103.83, its highest levels since December 2002. The U.S. currency is up 10% since mid-November with a bulk of its gains coming in the last three months.

The dollar shot past the key level of 130 yen for the first time since 2002 on Thursday as the Bank of Japan doubled down on its dovish policy, triggering a warning from Japan's Ministry of Finance not to push the yen too far.

"The BoJ gave the 'all clear' to continue selling the yen", commented Lee Hardman, a currency analyst at MUFG Bank in London.

The sell-off triggered by the BoJ saw the dollar soar by as much as nearly 2% and as high as 131 yen, its strongest in 20 years.

The euro briefly touched a more than five-year low of $1.0481, bringing its losses for the month to 5%, which would be its worst pummelling since early 2015.

Speculation is now growing that the common currency could be on course towards parity with the dollar, a level not reached since 2002.

"It's certainly looking like a realistic possibility", Hardman argued, noting another key support at $1.034, a level last reached in 2017.

(Reporting by Julien Ponthus in London, Wayne Cole in Sydney, additional reporting by Alun John in Hong Kong; Editing by Tomasz Janowski and Bernadette Baum)