The dollar extended its rally to fresh 2008 highs on Monday against a basket of currencies as oil's startling fall toward $105 a barrel improved expectations of lower global inflation and non-U.S. interest rates.

Michael Klawitter, head of FX strategy said:

What does that mean? We will see mounting rate cut expectations, which means spreads will move in favour of the U.S. dollar and partly in favour of the yen.

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