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Dollar firms on US rate hike prospects

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The dollar made broad gains on Thursday on prospects of a US interest rate hike this year, while the Greek debt crisis heightened the need for easy money in the eurozone.

[NEW YORK] The dollar made broad gains on Thursday on prospects of a US interest rate hike this year, while the Greek debt crisis heightened the need for easy money in the eurozone.

The euro fell against the dollar as the Greek parliament approved new austerity measures, opening the way for negotiations on a three-year bailout.

The European Central Bank meanwhile increased its lifeline for Greece's banks, and interim EU financing to keep Athens afloat was expected to be approved Friday.

"All of this uncertainty will require the ECB to maintain super-easy policies for even longer than was the case already," said Kit Juckes of Societe Generale.

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The euro fell to US$1.0856, its lowest level against the greenback in seven weeks.

Foreign-exchange market traders had their eyes on the looming interest rate increase in the United States.

Federal Reserve Chair Janet Yellen, in testimony to Congress this week, was upbeat about a potential pick-up in the US economy and reaffirmed the central bank's plan to raise its federal funds rate this year, pegged at zero since 2008 to support the recovery from the Great Recession.

"While US data and US rates have provided no meaningful fresh signal this week, the notion that headline risk from Greece is moving to the background has given traders an opportunity to re-establish positions, including USD long positions," Nomura said in a research note.

AFP

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