Investing.com -- The U.S. dollar rebounded against the euro on Thursday, one day after experiencing its largest one-day drop in more than six years amid indications from the Federal Reserve that it could raise interest rates by June.
In U.S. afternoon trading, EUR/USD fell 0.0205 or 1.89% to 1.0659. A day earlier, the pair moved above 1.0875 after Fed chair Janet Yellen said the Federal Open Market Committee will remove a reference to remaining patient as it decides on the timing of hiking interest rates above current levels of near 0%.
The euro is down by more than 10% against its American counterpart this year, as the start of its highly-anticipated bond buying program coincided with expectations of tightening by the Fed.
The U.S. Dollar Index, which measures the strength of the greenback against a basket of six other major currencies, rose more than $2.00 to 99.37. A day earlier, the index moved below 95.00 as it reached a three-week low.
In Brussels, there was little progress in talks between Greece and its euro zone creditors aimed at settling the reform measures needed by Athens to secure a critical bailout package. If a resolution is not reached by Thursday night, the next opportunity for an accord will be on Monday afternoon when Greece prime minister Alexis Tsipras is scheduled to meet with Germany chancellor Angela Merkel in Berlin.
Earlier on Thursday, yields on the Greece 10-year spiked reaching a two-year high at 12.2%. The increase exacerbates fears of a default on Greek debt.
Across the Atlantic, the yield on the U.S. 10-Year Treasuries moved back near 2.0 at 1.97 after falling more than 6% on Wednesday. Yields on U.S. 2-Year Treasuries increased more than 10% to 0.61 after falling by more than 17% one day earlier.
While the Fed appeared to be hawkish with the removal of patience, Yellen appeared to strike a dovish tone with forecasts for weaker inflation and GDP growth. The Fed expects Real GDP to grow between 2.1 and 3.1% for the remainder of 2015, while it predicted inflation of 0.6% to 0.8% by the end of the year. For 2016, the Fed projects that inflation will be between 1.7% and 1.9%. Last month in testimony before Congress, Yellen said that the Fed wanted to see inflation move toward its target goal of 2% before it raised interest rates.
In spite of the revisions, Yellen went out of her way to note that overall the forecast was not weak. She pointed to improvements in the labor market, forecasts for "above trend growth," and estimates of lowering unemployment to 5% by year's end to underscore her optimism.
“We do see considerable underlying strength in the US economy in spite of what looks like a weaker first quarter," Yellen said.