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FOREX-Dollar index hits 3-1/2 week low, commodity-linked currencies gain

* Euro hits 3-1/2 week high vs dollar

* Commodities rally supports Canadian, Australian dollars

* Bitcoin struggles to rise further after last week's selloff

(Updates market action, changes dateline, previous LONDON) NEW YORK, Dec 27 (Reuters) - The U.S. dollar fell to a 3-1/2 week low against a basket of currencies on Wednesday as traders bet more major central banks would begin reducing monetary stimulus in 2018 due to faster global economic growth. A rally in commodity prices, led by oil and copper, propelled the Canadian and Australian dollars to their highest levels in recent weeks. "The dollar has taken quite a beating against the majors in 2017," said Minh Trang, senior foreign currency trader at Silicon Valley Bank in Santa Clara, California. In holiday-thinned trading, an index that tracks the greenback against six currencies was down 0.3 percent at 93.003 after slipping to its lowest since Dec. 1 earlier Wednesday. The dollar index has fallen 9.0 percent this year, putting it on track for its steepest annual decline since 2003 when it posted a 14.7 percent drop. Conversely, the euro would post its best year against the greenback since 2003. The single currency reached a 3-1/2 week high on Wednesday at $1.1904, Reuters data showed. The dollar weakened versus the yen for a second straight year. It held steady on the day at 113.32 yen. "There are very few events to drive anything today," said Christin Tuxen, an FX strategist at Danske Bank in Copenhagen, adding that last week's passage of the biggest U.S. tax overhaul in 30 years has not helped the dollar. "For most people it's not going to be this dollar-supportive event." Traders have shifted their focus to central banks other than the U.S. Federal Reserve and whether they would reduce bond purchases or start raising interest rates next year, said Peter Chia, FX strategist for United Overseas Bank in Singapore. Against this backdrop, Japanese policymakers may at least start dropping more hints about an eventual tightening of the Bank of Japan's monetary policy, Chia said, adding that the dollar might slip to 108 yen by the end of March. Meanwhile, oil prices surged to 2-1/2 year highs on Tuesday due to news of an explosion on a Libyan crude pipeline and voluntary OPEC-led supply cuts. Copper prices on Wednesday rocketed to 3-1/2 year peak. Those developments bolstered demand for the currencies of commodity exporting countries, with the Canadian dollar touching C$1.2627, its strongest level in three weeks. The Australian dollar rose 0.6 percent to $0.7776, its highest level in two months. Among cryptocurrencies, bitcoin struggled to rebound further following its worst week since 2013. It was down 3 percent at $15,355.00 on the Luxembourg-based Bitstamp exchange.

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Currency bid prices at 9:50AM (1450 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change

Session

Euro/Dollar EUR= $1.1902 $1.1858 +0.37% +0.00% +1.1905 +1.1856 Dollar/Yen JPY= 113.3100 113.2200 +0.08% +0.00% +113.3700 +113.1500 Euro/Yen EURJPY= 134.88 134.27 +0.45% +0.00% +134.8800 +134.2100 Dollar/Swiss CHF= 0.9882 0.9889 -0.07% +0.00% +0.9904 +0.9884 Sterling/Dollar GBP 1.3416 1.3372 +0.33% +0.00% +1.3429 +1.3369 Dollar/Canadian CAD= 1.2639 1.2688 -0.39% +0.00% +1.2695 +1.2627 Australian/Doll AUD= 0.7764 0.7727 +0.48% +0.00% +0.7775 +0.7724

ar

Euro/Swiss EURCHF= 1.1765 1.1731 +0.29% +0.00% +1.1776 +1.1731 Euro/Sterling EURGBP= 0.8871 0.8863 +0.09% +0.00% +0.8882 +0.8855 NZ Dollar/Dolar NZD= 0.7061 0.7037 +0.34% +0.00% +0.7076 +0.7030 Dollar/Norway NOK= 8.2955 8.3089 -0.16% +0.00% +8.3243 +8.2808 Euro/Norway EURNOK= 9.8749 9.8548 +0.20% +0.00% +9.8859 +9.8520 Dollar/Sweden SEK= 8.2834 8.3469 -0.36% +0.00% +8.3545 +8.2870 Euro/Sweden EURSEK= 9.8613 9.8972 -0.36% +0.00% +9.9205 +9.8646

All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX World central bank news CEN

Economic Forecasts... ECON Official rates...INT/RATE Forex Diary.......MI/DIARY Top events........M/DIARY

Diaries...........DIARY Diaries Index........IND/DIARY Press Digests.....PRESS Polls on G7 economies..SURVEY/ European markets......MARKETS/))

(Additional reporting by Tommy Wilkes in London; Masayuki Kitano in Singapore; Editing by Andrew Roche and Andrew Hay)