LONDON, Mar 20 (Reuters) The dollar held close to last week's seven-week low against the euro on Monday as expectations lingered the Federal Reserve might be close to ending a series of interest rate hikes which started in June 2004.
High-yielding New Zealand and Australian dollars extended recent losses, falling as much as 1.6 per cent as expectations grew for weak economic data and a possible interest rate cut in New Zealand, providing some relief for the U.S. currency.
Investors are now waiting for speeches from Federal Reserve officials, including Chairman Ben Bernanke, for clues on how much more the central bank will raise rates after an expected 25 basis point hike next week.
''The market is focused on the Fed's tightening cycle. We seem to be at the end of the cycle and as soon as we know that there would be no more rate hikes in the pipeline, the dollar will come under pressure,'' said Marios Maratheftis, currency strategist at Standard Chartered.
The dollar had fallen to $1.2197, close to the seven-week low of $1.2207 hit last week, before trimming losses to $1.2170 by 1235 GMT (1805 IST).
Earlier on Monday, ECB President Jean-Claude Trichet said the central bank was doing everything it could to keep inflation in check.
''Trichet was hawkish and it is clear the ECB is not finished with rate hikes,'' Maratheftis said.
Fed chief Bernanke is due to speak on the yield curve and monetary policy at 0000 GMT (0530 IST). Other Fed speakers due on Monday include Boston Fed president Cathy Minehan at 1600 GMT (2130 IST) and San Francisco Fed president Janet Yellen at 1710 (2240 IST).
The dollar was slightly up at 116.07 yen, after hitting a two-week low of 115.67 yen marked on Friday.
KIWI, AUSSIE SELL-OFF The New Zealand dollar hit a 20-month low of US$0.6236, taking its cue from a slowdown in the pace of economic growth in New Zealand and a view that the next central bank move will be to lower rates.
The kiwi, which offers the highest interest rate in developed economies of 7.25 per cent, has now lost around 8.5 per cent against the U.S. dollar since January, making it the worst performing major currency this year.
The Australian dollar hit a 17-month low of US$0.7194, after recording its biggest one-day drop in almost nine months on Friday.
''Tighter global liquidity conditions are a major threat to these currencies via many different channels -- softer commodity prices, less Uridashi, less reserve manager demand, higher G3 interest rates,'' HBOS Treasury Services said in a note to clients.
New Zealand fourth-quarter GDP data is due later this week.
With attention on higher-yielding currencies, the yen was largely sidelined, shrugging off a warning from Japan's Vice Finance Minister Koichi Hosokawa who said there has been a bit of volatility in the currency market in recent weeks and that the government would watch the situation carefully.
The Bank of Japan, which ended five years of super-loose monetary policy earlier this month, is expected to keep interest rates near zero for some time before raising them later this year.
REUTERS SD VC1953