Dollar index remains near 9-year highs on U.S. rate hike expectations

Investing.com –

Investing.com – The dollar remained near nine-year highs against the other major currencies in auiet trade on Monday, as expectations for a U.S. rate hike this year continued to lend broad support to the greenback.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, was up 0.31% to 91.77, not far from the session’s highs of 92.05, the most since December 2005.

Demand for the dollar continued to be underpinned by the diverging policy outlook between the Federal Reserve and central banks in Europe and Japan.

The Fed is widely expected to raise interest rates in the coming year as the steady economic recovery in the U.S. continues.

EUR/USD hit lows of 1.1858, the weakest since February 2006, and was last at 1.1919, down 0.70% for the day.

The single currency came under pressure after official data showed that German inflation slowed to the lowest level since 2009 in December.

German consumer price inflation accelerated at an annualized rate of 0.2% last month, below forecasts for 0.3% and slowing from 0.6% in November.

The euro also weakened after European Central Bank President Mario Draghi said Friday the risk of the bank not fulfilling its mandate of price stability is higher now than six months ago.

Uncertainty over Greece’s future in the euro zone also weighed ahead of upcoming elections later this month.

The dollar declined against the yen, with USD/JPY down 0.87% to 119.45.

Elsewhere, sterling was struggling near 17-month lows after data showing a slowdown in construction activity in the U.K. last month underlined expectations that the Bank of England will keep rates on hold for most of 2015.

GBP/USD was down 0.69% to 1.5221, not far from overnight lows of 1.5167, the weakest since August 2013.

USD/CHF was up 0.63% to 1.0077 as weakness in the euro added to pressure on the Swiss National Bank to defend its 1.20 per euro exchange rate floor.

The commodity-exposed Australian, New Zealand and Canadian dollars were trading at multi-year lows, as oil prices fell to five-year lows on Monday. AUD/USD was steady at 0.8085 and NZD/USD was also little changed at 0.7699. USD/CAD edged up 0.09% to 1.1795, hovering close to more than five-year highs of 1.1843.

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