LONDON: The dollar strengthened on Tuesday on the back of broadly higher U.S. Treasury yields while the euro was buffeted by official comments and media reports on the progress of discussions over a new debt deal for Greece.
The euro sank below $1.13 in morning trade in Europe but it recovered almost half a cent around midday London time after a report said European officials would make a compromise proposal to give Athens another six months to negotiate.
The dollar hit a one-month high against the yen and its resurgence was the dominant note after a quieter week of trading and overnight gains for commodity price-dependent currencies like the Australian dollar and Norwegian crown.
"You're just seeing a bit of dollar strength across the board," said Peter Kinsella, a strategist with Commerzbank in London.
"There's no immediate catalyst for further dollar strength at the moment, although I'm sure we'll see it, and you've got everybody waiting for Greece as of tomorrow with the Eurogroup meeting."
The dollar was up around a quarter of a percent against a basket of currencies by 1230 GMT and by roughly the same amount against the euro at $1.1296. Against the yen it gained 0.6 percent to 119.39 yen.
U.S. Treasury yields, whose purported rise is a key argument for the dollar's strength since the middle of last year, have jumped 20 basis points since early on Friday.
There has been a broadly steady tone to the dollar, yen and euro for most of the two weeks since the European Central Bank announced a quantitative easing scheme to reflate an increasingly moribund euro zone economy.
However, fears that Greece's new government could be inching its way out of the single currency in a standoff with Germany have begun to weigh on the euro this week.
"At some point this week, we're going to see the single currency break from the relative resilience we've seen so far in relation to events in Greece," said London retail broker FxPro's chief economist, Simon Smith.
The main event overnight was a fall in Chinese inflation to a five-year low, providing support for expectations of further policy easing by Beijing to protect growth.
That pulled the Shanghai stock exchange higher, generating a 0.3 percent gain for the Aussie, which is highly geared to the outlook for its main Asian trading partner. That move, and similar shifts in the New Zealand dollar and Norwegian crown, had reversed by midday in London.
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