* Dollar extends gains reversing early losses
* Dollar index at 2014 peak
* Speculation of more ECB action keeps pressure on euro
* Euro near lowest level since January 2013 vs Swiss franc (Adds late New York prices, quotes)
By Michael Connor
NEW YORK, Aug 26 (Reuters) - The dollar extended gains on Tuesday on hopes U.S. policymakers will raise interest rates as the battered euro continued to struggle on expectations of soft inflation data and more monetary easing in Europe.
A basket of currencies traded against the greenback was up 0.16 percent in late New York trading after touching a fresh 2014 high of 82.698 and traded as low as 82.434. The dollar index was last at these levels nearly a year ago.
"We are seeing the dollar consolidate," said Eric Viloria, currency strategist at Wells Fargo Securities in New York.
Meanwhile, traders awaited U.S. economic data and European inflation numbers due out later this week. They also continued to assess the central bankers conference in Wyoming, where European Central Bank President Mario Draghi displayed a stronger than expected openness toward monetary loosening, according to Valoria.
"There is some data due out this week. We are going to get inflation out of the eurozone, that revision of GDP from the U.S., and there will be GDP out of Canada," he said. "The markets are still digesting some comments from central bank officials from Jackson Hole."
The euro was at $1.3171 after touching a low of $1.3165, its weakest since Sept. 9. The common currency shared by 18 nations was worth nearly $1.40 in early May.
Against the yen, the dollar was last up 0.08 percent at 104.12 yen.
"After a couple of sessions of solid gains for the dollar, it's not unlikely to see a little profit-taking, a little consolidation," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
Currency prices were only mildly affected by data showing orders for long-lasting U.S. manufactured goods had posted their biggest gain on record in July on strong international demand for aircraft.
For the euro, weak German economic figures and the resignation of the French government following a row over fiscal policy added to the bearish mix.
The euro was last trading at 1.2083 Swiss francs, having fallen to 1.2072 on Monday, its lowest since early January 2013 on trading platform EBS. Its drop could test the Swiss National Bank's three-year-old pledge to cap the franc at 1.20 per euro.
Investors betting on more euro weakness are waiting for euro zone inflation data on Friday. Analysts polled by Reuters expect annual inflation to have slowed to 0.3 percent in August from 0.4 percent in July. That would be well below the European Central Bank's danger zone of 1.0 percent and its target of just under 2.0 percent.
Late on Friday, in stronger language than he has used in the past, ECB head Draghi said the bank was prepared to respond with all its "available" tools should inflation drop further.
Those comments have triggered speculation that the ECB may be prepared to ease policy further, driving bond yields lower.
In contrast to Draghi, Federal Reserve Chair Janet Yellen on Friday acknowledged the concerns of some Fed officials about the sustained level of monetary policy stimulus, even as she stressed the need to move cautiously on raising benchmark interest rates.
(Reporting By Michael Connor in New York; Editing by Diane Craft)
- USA News