* Dollar index holds near lowest since January
* U.S. April producer inflation weaker-than-expected
* U.S. data suggest Fed rate hike on hold (Updates prices, adds comments, changes byline, dateline, previous LONDON)
By Sam Forgione
NEW YORK, May 14 (Reuters) - The U.S. dollar held near its lowest since January against a currency basket on Thursday after downward U.S. producer price data challenged hopes for better U.S. economic growth and supported the view that the Federal Reserve would delay hiking interest rates.
The Labor Department said its producer price index for final demand fell 0.4 percent last month, declining for the third time this year. While data showing U.S. jobless claims fell 1,000 to 264,000 last week showed solid footing in the U.S. jobs market, the inflation data reinforced the view of a dovish Fed.
"People are pretty focused on the weak numbers for the U.S.," said David Gilmore, partner at Foreign Exchange Analytics in Essex, Connecticut. "People are increasingly wondering if the Fed is going to be ready to begin raising rates in September."
The U.S. dollar index, which measures the greenback against a basket of six major currencies, held near a low of 93.133 hit earlier in the session. That level was the lowest since Jan. 22, when the European Central Bank announced a program of quantitative easing.
The euro was higher against the dollar after hitting a roughly three-month high of $1.14450 earlier in the session.
The latest U.S. producer inflation data intensified concerns that weak U.S. economic growth in the first quarter, which was attributed largely to harsh winter weather and low energy prices, persisted into the second quarter. On Wednesday, the government posted weaker-than-expected April U.S. retail sales.
The dollar index, which rallied over 26 percent between early May 2014 and mid-March of this year, largely on expectations of a coming Fed rate hike, was set to post its third straight session of losses.
"You do still see large amounts of U.S. dollar longs amongst the asset manager community," said Ian Gordon, FX strategist at Bank of America Merrill Lynch in New York. "Those positions were made on a presumption that U.S. data would pick up, and now that it's not, I think those positions are getting challenged."
The dollar index was last down 0.21 percent at 93.419. The euro was last up 0.36 percent against the dollar at $1.13970 .
The dollar was down 0.33 percent against the Swiss franc at 0.91390 after hitting a one-week low of 0.90785 franc earlier in the session. The dollar was flat against the yen at 119.160 yen after hitting a two-week low of 118.885. (Reporting by Sam Forgione Editing by W Simon)