By Sam Forgione
NEW YORK (Reuters) - The U.S. dollar extended its plunge against major currencies on Thursday as traders sharply unwound bullish bets against the greenback on continued scepticism that the Federal Reserve would be able to hike interest rates this year.
The euro rose more than 1 percent to its highest in 15 weeks at $1.12390 against the dollar , while the dollar fell more than 1 percent to a two-week low against the yen of 116.525 yen .
The dollar index, which measures the greenback against a basket of six major currencies, hit a roughly 15-week low of 96.259 .
Against the Swiss franc, the dollar dropped more than 1 percent to a 3-1/2-week low of 0.99210 franc .
"The market came into 2016 with a strong preference for the dollar against virtually all other currencies," said Shahab Jalinoos, global head of FX strategy at Credit Suisse in New York. "That idea has been really challenged."
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Many market participants entered the year with expectations that divergence in monetary policy between a tightening Fed and stimulative European Central Bank and Bank of Japan would lead the dollar higher. In December, Fed policymakers had projected four rate hikes this year.
Analysts have said dovish comments from New York Fed President William Dudley to MNI on Wednesday and recent weak U.S. economic data have reduced the likelihood of a steady pace of Fed rate increases. The dollar index posted its biggest one-day fall in two months on Wednesday.
Speculators have cut bullish bets on the dollar in recent weeks. The value of the dollar's net long position was at $23.85 billion in the week ended Jan. 26, marking the fifth straight weekly decline according to Reuters calculations and data from the Commodity Futures Trading Commission.
Fed funds futures contracts on Thursday suggested traders were pricing in just a 10 percent probability of a Fed rate hike next month and a 41 percent chance by the end of the year, according to CME FedWatch.
U.S. economic data on Thursday, including figures showing new orders for factory goods fell in December by the most in a year, reinforced views that the Fed, the U.S. central bank, would delay further rate hikes.
Investors awaited Friday's January U.S. nonfarm payrolls report.
"The market does not have any appetite or patience for a weak number," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago. He said a weak report could send the euro to $1.14.
(Reporting by Sam Forgione; Editing by Lisa Von Ahn and James Dalgleish)