Dollar falls, on track for worst month since April

100 dollar bills
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The dollar fell against a basket of currencies on Thursday, putting it on track for its steepest monthly loss since April, as traders resumed booking profits on their bullish bets on the greenback following the U.S. interest rate hike last week.

A bounce in oil prices from 11-year lows supported the Canadian dollar, Norwegian crown and other commodity-linked currencies.

Trading volumes were a fraction of daily averages, with skeletal staffs at bank trading desks in London and New York ahead of Christmas. U.S. and European financial markets will be closed on Friday.

Despite this week's decline, most analysts remain upbeat on the dollar's longer-term advance as the Federal Reserve is expected to continue to raise rates, possibly four times in 2016. Their forecast gain for the dollar is far smaller than a year ago, and there is less consensus on which currencies it can gain against.

"The Fed is on track to raise rates in 2016, which will be critical for the dollar," said Shaun Osborne, chief currency strategist at Scotia Capital in Toronto.

Last week, the U.S. central bank raised rates for the first time in nearly a decade, lifting the target range of its policy rate by a quarter point to 0.25-0.50 percent.

Since the hike, the dollar has weakened against major currencies as traders reduced their long positions on the greenback, analysts said.

The dollar index, which gauges the greenback's value against a group of six currencies, was 0.35 percent lower at 97.99, putting it on track for a weekly loss of 0.75 percent. On the month, it has fallen 2.2 percent, which would be biggest drop since April.

The dollar hit a near two-month low against the yen. It was last down 0.5 percent at 120.28 yen.

The euro rose 0.36 percent against the dollar to $1.0952, but dipped 0.17 percent to 131.73 yen.

A rebound in oil prices from 11-year lows boosted the currencies of oil exporters such as Canada and Norway.

The Canadian dollar edged up 0.01 percent at C$1.385, while the Norwegian crown climbed 0.28 percent to 8.69 crowns per U.S. dollar.

The Australian and New Zealand dollars also got a boost following a brutal late-year sell-off of oil and other commodities. They were up around half a percent at $0.7275 and $0.6839, respectively.

Sterling was up 0.3 percent at $1.4922 after British data showed banks approved 20 percent more mortgages in November than a year ago.