By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - The euro rose to more than a three-month high against the dollar on Monday after European Central Bank chief Mario Draghi said he sees a vigorous pickup in euro zone inflation, backing moves toward unwinding an ECB asset purchase program meant to stimulate the economy.
The single currency has been on an uptrend the last few weeks, bolstered by generally solid European economic data. Over the last 10 days, the euro has risen 2.5 percent versus the greenback.
The dollar, meanwhile, was little changed to slightly higher against the yen, as investors searched for fresh clues to extend a multi-month rally in the greenback before a widely-expected interest rate hike by the U.S. Federal Reserve this week.
The dollar briefly dipped against the yen after some media said U.S. Deputy Attorney General Rod Rosenstein was headed to the White House amid reports he had offered to resign in anticipation of being fired by President Donald Trump.
Other media, however, reported that Rosenstein, who oversees the special counsel investigation into Russia's role in the 2016 U.S. presidential election, had not offered to resign.
With the Fed decision a few days away, markets were jolted by Draghi's hawkish comments on inflation and wage growth even though he affirmed the ECB's pledge to keep rates at their current, rock-bottom level "through the summer" of next year.
John Doyle, director of markets at Tempus Consulting in Washington, said Draghi's remarks reinforced the view that other central banks are catching up with the Fed in terms of tightening monetary policy.
"The idea of divergence between the Fed tightening and other central banks either on hold or cutting rates is not there to support the dollar anymore," Doyle said.
In midday trading, the euro rose 0.2 percent against the dollar to $1.1771 (EUR=). It rose to as high as $1.1815, a 3-1/2-month peak.
The euro earlier was also boosted after German Chancellor Angela Merkel's coalition government resolved a dispute over the country's scandal-tainted spy chief on Sunday, ending a threat to the six-month-old administration.
Against the yen, the dollar was up 0.1 percent at 112.65 yen
With the market forecasting a rate hike this week, another in December and two more next year - roughly in line with Fed policymakers' projections - analysts said only unexpectedly strong data would change those bets.
"Dollar direction could boil down to how many rate hikes the Fed pencils in over the coming year," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
"The Fed could increase its forecast for 2019 rate hikes from three to four with inflation showing signs of pushing above its 2 percent goal, a hawkish scenario that would likely be positive for the dollar," he added.
Earlier the dollar snapped a two-week losing streak as the weekend brought global trade tensions back into the spotlight after Beijing released a white paper on its trade dispute with the United States, saying it would seek a reasonable outcome, while also describing U.S. tactics as "bullying."
The dollar index was last down 0.1 percent at 94.138 (DXY), mainly weighed down by the euro's gains.