The dollar rallied against the euro, yen, and Swiss franc on Monday after a debt deal between Greece and its international lenders renewed focus on the possibility that the US Federal Reserve might hike interest rates in September. Eurozone leaders made Greece surrender much of its sovereignty to outside supervision on Monday in return for agreeing to talks on an 86 billion euro bailout to keep the near-bankrupt country in the single currency.
If the summit had failed, Greece would have been staring into an economic abyss, with its shuttered banks on the brink of collapse and prospects of having to print a parallel currency and exit the European monetary union. Analysts said that, while uncertainty about Greece's future remained, the deal turned investors' focus to a potential Fed rate hike in September after comments from central bank Chair Janet Yellen and Boston Fed President Eric Rosengren on Friday suggested that could be likely.
Yellen will give closely watched semi-annual testimony to US Congress later in the week. "The Fed seems to be setting itself up to hike in September," said Steven Englander, global head of G10 FX strategy at CitiFX in New York. He said the Greek deal removed an obstacle to a Fed rate hike. "If you take Greece off as an immediate issue," he said, "all of a sudden you say: 'What are the impediments to the Fed hiking?'"
The euro slumped more than 1 percent against the dollar and hit a session low of $1.10155. The dollar hit a more than one-week high against the yen of 123.535 yen. The dollar was last up 1.18 percent at 0.94870 Swiss franc . The dollar index, which measures the greenback against a basket of six major currencies, was up 0.73 percent at 96.710.
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