The euro fell on Monday, hurt by uncertainty over whether Greece and its international creditors will be able to strike a deal that will help Athens secure funding before it runs out of money by April 20.
Talks continued through the weekend on reforms to unlock loans and Athens sounded an upbeat tone, but the lenders said it could take several more days before a proper list of measures was ready.
The dollar rose broadly, helped by comments from Federal Reserve chair Janet Yellen, who underscored the view that the Fed is likely to start raising interest rates gradually later this year.
The dollar edged up 0.3 percent to 119.50 yen JPY=, while the euro fell 0.6 percent to $1.0830 EUR=, having in the last two weeks pulled away from a 12-year trough of $1.0457.
"Even though euro short positions are at record highs, given the Greek uncertainty and the bias for more monetary injection by the European Central Bank, the path for least resistance is a lower euro/dollar," said Jeremy Stretch, head of currency strategy at CIBC World Markets.
"Unless the euro drops below $1.0770 we could see ranged trading, but with the Fed still looking to raise rates, we could see conditions later this week that are more helpful for overall dollar strength."
U.S. jobs data on Friday will be a key event for the dollar this week and a robust report could see investors position for tighter monetary policy sooner rather than later. ECONUS
In a speech on Friday, Yellen outlined the case for a 'gradualist approach' to rate hikes, in comments mirroring those at the post-FOMC meeting on March 18. She signaled the Fed will likely start raising borrowing costs later this year but said policy tightening could "speed up, slow down, pause, or even reverse course" depending on actual and expected developments in the economy.
"Yellen went to great length to detail why rate hikes would not be rushed and ultimately may not reach levels previously considered to be 'normal'," said Ray Attrill, global co-head of FX strategy at National Australia Bank.
"Our take is that while rates may rise sooner and faster than current market pricing, they are more likely to undershoot than overshoot the Fed's latest median 'dot point' trajectory."
Still, the diverging rate pathways between the Fed and most of the developed world meant the dollar should stay supported.
"Our view of the U.S. dollar remains broadly positive and we have always viewed that the correction of the past two weeks in the U.S. dollar is temporary," said Heng Koon How, senior FX strategist for private banking and wealth management at Credit Suisse in Singapore.
Join the Conversation