The U.S. dollar hit a three-year high against a basket of currencies today, with investors increasingly convinced that the Federal Reserve is leaning toward reducing stimulus at a time when other major central banks could opt to further ease monetary policy, Reuters reported.

 

Expectations that the Fed, which releases minutes from its June monetary policy meeting on Wednesday, will scale back its $85 billion-a-month in asset purchases as early as September are encouraging investors to buy dollars.

 

The euro, which dominates the composition of the dollar index, tumbled to $1.276, its lowest level against the dollar since early April. The European Central Bank (ECB) said last Thursday that it would keep its interest rates at present or lower levels for an "extended period," - its first use of so-called forward guidance.

 

In midday New York trading, the dollar index, which measures the greenback against a basket of six currencies, rose as high as 84.753 - a three-year peak. It last traded at 84.684, up 0.6 percent on the day.

 

"The outlook for continued easy monetary policy from the ECB for over a year, contrasts with expectations for the Fed to begin removing policy accommodation, possibly as early as September," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, D.C.