* Dollar index near its 2015 peak
* Euro hurt by worries over Italy's referendum
* Rising implied volatility suggests traders' wariness
By Hideyuki Sano
TOKYO, Nov 15 (Reuters) - The dollar is closing in on a test of its highest level in almost 14 years as bond yields soared after Donald Trump's election to president, bringing buyers back to the U.S. currency.
The dollar index .DXY =USD vaulted above its January peak to hit 100.22 on Tuesday, its highest level since early December last year.
It is coming within reach of its December 2015 peak of 100.51, and a rise above that would take it to its highest level since 2003.
Since Trump won the U.S. presidential last week, the 10-year U.S. bond yield US10YT=RR has jumped about 0.40 percentage point to 10-month highs as his policies of major fiscal spending and trade protectionism are seen likely to stoke inflation.
"Everyone knows that there are questions over how much of his campaign promises Trump can actually deliver. There could be friction between the White House and the Congress down the road," said Kazushige Kaida, head of forex at State Street.
"But market players are not political scientists. For now, they have decided to jump on this euphoria," he added.
The dollar rose to 108.545 yen JPY= before easing 0.5 percent in Asia to 107.86 yen. The U.S. currency is still up 6.7 percent from a low touched last Wednesday.
"Given the massive increase in U.S. bond yields, the dollar is within sight of testing 110 yen," said Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ.
"Even though U.S. bond yields rose sharply, U.S. stock prices were firm. As long as the U.S. share markets are supported, I suspect the dollar's appreciation will continue," he added.
The U.S. dollar rose to an 8 1/2-month high of C$1.3589 CAD=D4 versus its Canadian counterpart.
The euro dropped to as low as $1.0709 EUR= , its lowest level since December. It last stood at $1.0766.
The euro is also undermined by growing worries Italian Prime Minister Matteo Renzi may not stay on if he loses a referendum on constitutional reform on Dec. 4.
Polls show the "no" vote firmly in the lead, with Trump's unexpected victory seen bolstering support for Renzi's populist rivals in the 5-Star Movement. euro is also slipping against other European currencies, hitting an 8-week low of 0.8567 to the pound EURGBP=D4 and a five-month low of 1.0688 versus the Swiss franc.
Implied volatilities on currency pairs, such as euro/dollar and dollar/yen, are rising, suggesting market players are also wary of the possibility of a sudden fall in the dollar despite its spectacular gains over the last few days, said State Street's Kaida.
The euro/dollar one-month implied volatility EUR1MO= rose to nearly 11 percent, touching its highest level since late June while that of the dollar/yen JPY1MO= also rose to almost 13 percent from last week's low around 10.5 percent.
The offshore yuan CNH=D4 fell to its weakest against the dollar since before the launch of its offshore market in 2010.
The yuan's trade-weighted index .RXYH is stable, however, staying in ranges seen in the past few months.