* US dollar index at 3-year low, worst month since Sept
* Swiss franc at record high vs USD, helped by SNB comments
* Month-end flows seen tilted toward dollar selling (Updates prices, adds details and quote)
By Julie Haviv
NEW YORK, April 29 (Reuters) - The U.S. dollar hit a three-year low against a basket of currencies on Friday, ending the month with its biggest loss since September, with more weakness expected as the Federal Reserve keeps interest rates low while the European Central bank raises them.
Higher interest rates in Europe have undermined support for the dollar, boosting the euro by 11 percent so far this year.
The U.S. dollar index <.DXY> hit a three-year low of 72.834. The index has fallen for five straight months after tallying a 3.8 percent April decline.
"There is no fundamental reason for investors to buy dollars aside from the possibility that it is now undervalued," said Kathy Lien, director of currency research at GFT Forex in New York.
The dollar index last traded at 72.996, down 0.2 percent.
In contrast, the euro/dollar gained 4.7 percent in April, marking its strongest month since September.
The euro was buoyed by stronger-than-expected euro zone inflation data that increased the chance of another ECB rate rise, sooner rather than later. For more, see 
The euro last traded at $1.4834 <EUR=>, up 0.1 percent, after hitting a high of $1.4878. The euro on Thursday hit a 17-month peak of $1.4882 on trading platform EBS.
But the euro ran into selling and could struggle ahead of a reported options barrier at $1.4900.
Resistance was expected at $1.4906, a peak from Dec. 7 2009, ahead of a substantial barrier at $1.5000. Beyond $1.5000, the key target was the 2009 high of $1.5145.
Technical factors and overextended speculative positioning suggest the dollar's decline may slow next week, according to Vassili Serebriakov, currency strategist at Wells Fargo in New York,
"However, with the Fed sending a strong dovish message, we see few significant triggers for an immediate dollar turnaround."
U.S. economic data on Friday showed consumer spending rose as households stretched to cover the higher cost of food and gasoline as inflation posted its biggest year-on-year rise in 10 months. 
For graphic on U.S. personal consumption
Fed funds rate hike expectations
Nevertheless, based upon price action in the market, there are some signs the dollar may be reaching a bottom, Lien said.
"From a purchasing power parity perspective, the dollar is undervalued against every major currency, with the trade weighted index now approaching its lowest level since before the Plaza Accord in the 1980s," she said.
"The recent extremeness of the dollar's move could attract value hunters, but with a number of key event risks next week posing a threat to the U.S. dollar, we don't expect a material recovery."
The U.S. Labor Department will publish monthly unemployment next week.
Analysts at Citigroup said dollar bearishness should persist.
"It is hard to be optimistic on the USD's long-term prospects, given the Fed's ability to surprise on the dovish side, the ongoing overhang of U.S. dollar assets among reserve managers and the concerns that have emerged on long-term U.S. fiscal prospects," CitiFX said in a research note.
Trading was thinned by the holiday for Britain's royal wedding.
The Swiss franc was buoyed by upbeat comments from the Swiss National Bank's chairman and an above-forecast Swiss sentiment survey. 
The Swiss franc rose around 0.8 percent on the day to hit a record high of 0.8653 francs per dollar <CHF=> on EBS. The euro was last down 0.7 percent <EURCHF=> at 1.2858 francs.
Against the yen, the dollar was down 0.4 percent at 81.18 yen <JPY=>. (Additional reporting by Jessica Mortimer in London; Editing by Kenneth Barry)