The dollar edged lower and bond yields fell after US Federal Reserve chair Janet Yellen said yesterday it would be several months before the Fed expects to raise interest rates, while European equity markets gained after Greece produced a list of proposed economic reforms.

Yellen said the Fed’s policy-setting committee is considering interest rate hikes “on a meeting by meeting basis”. She added, however, that a rate increase is not likely for at least the next couple of meetings, and that the first hike would not necessarily come after the Fed removes the word “patient” from its forward guidance.

Short-term rate futures indicate the market expects the first hike in September, the same as before Yellen’s testimony – but expectations for a possible June increase have been reduced. Strategists said Yellen was giving the Fed more flexibility to raise rates later if necessary.

“It’s very cautious and very couched. She’s leaving all her options open as she should be,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

The greenback jumped initially but paired gains and was later up 0.05 percent against a basket of currencies. US 10-year Treasury yields initially rose to about 2.11 per cent, but subsequently declined to 2.01 per cent.

“They’re trying to give themselves more flexibility without locking themselves into a commitment one way or the other, which in general can be perceived as being dovish,” said Jonathan Rick, interest rate derivatives strategist at Credit Agricole in New York.

Wall Street stocks rose modestly. The Dow Jones industrial average was up 52.53 points, or 0.29 per cent, at 18,169.37. The Standard & Poor’s 500 Index was up 0.85 point, or 0.04 per cent, at 2,110.51. The Nasdaq Composite Index was down 8.27 points, or 0.17 per cent, at 4,952.71.

Gold fell to near a seven-week low of just below $1,194 an ounce. Expectations for rate hikes this year have curbed gold’s safe-haven appeal in recent weeks.

European stocks gained for a sixth day after Greece delivered its proposed reforms to the Eurogroup, the eurozone’s finance ministers. If they are approved, Greece will get a four-month extension of its financial lifeline.

Greece’s stock market, which was closed on Monday, jumped nearly 10 per cent, hitting a three-month high. Greek , Italian and Spanish bond yields all edged lower. The benchmark FTSEurofirst 300 index rose 0.5 per cent to a seven-year high.

The reforms included promises not to roll back any ongoing or completed privatizations and assurances that any state spending to address what Greece’s new government has called a “humanitarian crisis” would not hurt the country’s budget.

Oil prices rebounded, with US crude up 45 cents at $49.90 and Brent in London up to $59.29 a barrel.

Asian markets were higher overnight. Tokyo reached another 15-year peak and MSCI’s broadest index of Asia-Pacific shares outside Japan ended flat.