dollar takes breather after strong rally

New York: The dollar weakened Tuesday after huge gains the prior week appeared to encourage profit taking, while the euro benefited from Greece’s progress toward a bailout.”A lull in the US economic calendar over the first half of the week has enticed many to cash in a few of the dollar’s big two percent gains from last week which amounted to its best weekly performance in two months,” said Joe Manimbo at Western Union Business Solutions.The euro rose to $1.0942 around 2100 GMT from $1.0824 at the same time Monday. The dollar also fell against the yen, to 123.86 from 124.30.The dollar’s weakness should be fleeting as the US Federal Reserve readies an interest rate increase, said Kathy Lien of BK Asset Management, with the next update of the Fed’s stance coming after a policy meeting on July 29.”Although the Fed is not expected to raise interest rates in July, the tone of the monetary policy statement should be optimistic, reinforcing the notion that the economy is ready for tightening,” she said.Last week Fed chief Janet Yellen said the rate hike was likely this year, underpinning the dollar’s rally. In Europe, there was positive movement in Greece’s efforts to gain a new bailout. The Greek government submitted to parliament a second batch of reform measures needed to start negotiations, with a vote scheduled for Wednesday.”The euro is higher as progress continues to be made toward a third financial assistance program for Greece,” said Nick Bennenbroek, head of currency strategy at Wells Fargo Securities.