Euro falls in Europe after Greek deal

The euro fell on Monday after eurozone leaders reached a deal with debt-stricken Greece, as investors turned their focus to the prospect of higher US interest rates and remained anxious that the future of the single currency was still uncertain. At the end of a marathon night of talks, euro zone leaders made Greece surrender much of its sovereignty to outside supervision in return for agreeing to talks on an 86 billion euro bailout.
But that is subject to parliamentary approval and the bailout will only happen if Greek Prime Minister Alexis Tsipras can meet a tight timetable for enacting a series of unpopular reforms. The single currency, which had initially risen on the news, reversed its gains to trade down 1 percent on the day at $1.1050. "This is not over yet, in fact it might be far from over," said Anthony Lawler, a portfolio manager who invests in hedge funds at investment firm GAM in London. "It is not at all certain that the Greek government will accept what is proposed."
"Our medium-term expectation is that the euro continues to weaken but you should see some significant volatility in the near term," Lawler added. "We believe the Fed will raise rates before the end of the year ... which on the margin we believe will continue to help the dollar." Investors said the Greek deal had made it more likely that the US Federal Reserve, which has previously said it would look at the Greek crisis when considering monetary policy, would raise interest rates during 2015.
For that reason, the dollar rallied across the board, hitting an 11-day high against the yen at 123.495, which is traditionally bought by investors at times of uncertainty. Against a basket of major currencies, the greenback was 0.4 percent higher on the day at 96.429. "(The deal) represents a removal of a potential restraint on Fed tightening plans, so there is a dollar positive aspect to it," said Ian Gunner, portfolio manager of the Altana Hard Currency Fund in London. "The big twin uncertainties over the past few months have been Greece and Fed tightening."
Federal Reserve Chair Janet Yellen will give a semi-annual testimony to US Congress later in the week, which will be closely watched for clues on when interest rates might start to increase. Last Friday, Yellen said she expected the Fed to raise interest rates at some point this year. Boston Fed President Eric Rosengren, one of the Fed's most dovish officials, said on Friday that September may be the right time to hike rates if the US economy continued to improve.