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By Bloomberg

The dollar held gains as the prospect of an end to Greece’s turmoil prompted investors to shift focus to testimony this week from Federal Reserve Chair Janet Yellen as she prepares to raise interest rates later this year.

A gauge of the greenback remained higher after closing at the strongest in more than a month on Monday as Greece reached an agreement with its creditors. The U.S. currency held onto a three-day gain against the yen Tuesday as the Bank of Japan begins a two-day policy meeting which is likely to emphasize the divergence between the two economies. Australia’s currency rose after business confidence reached its highest since the election of Prime Minister Tony Abbott in September 2013.

“Expectations of a Fed rate hike have propelled dollar buying this far,” said Naohiro Nomoto, an associate for currency trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Market players, expecting the Greek issue to drag on, are ignoring Greece and returning to dollar buying amid data and congressional testimony by Yellen this week.”

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against its 10 major peers, was little changed at 1,195.82 at 11:46 a.m. in Tokyo from 1,196.51 in New York, the highest close since June 1. The greenback bought 123.45 yen from 123.43. The euro traded at $1.1007 after tumbling 1.4 percent to $1.1002 on Monday.

The dollar has surged 21 percent in the past year, the best performance among the 10-developed-nation currencies tracked by Bloomberg Correlation-Weighed Currency Indexes. The euro fell 4.5 percent.

Greek Surrender

Greek Prime Minister Alexis Tsipras on Monday surrendered to European demands for immediate action to qualify for as much as 86 billion euros ($95 billion) of aid needed to keep his country in the currency union. He has until Wednesday to pass into law key creditor demands. The agreement still needs the approval of several national parliaments, including Greece’s.

“One important side-effect of diminished Greece concerns Monday has been the recovery in Fed rate hike expectations,” BNP Paribas SA strategists including Daniel Katzive wrote in a note dated July 14. “A firm run of U.S. data this week could see expectations pulled a bit further forward to the benefit of the USD.”

U.S. retail sales rose for a fifth month this year in June, according to a Bloomberg economist survey before the release of data Tuesday.

Yellen said last week that she expects it “will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy.”

In contrast, the European Central Bank, which meets July 16, has said it will maintain its unprecedented stimulus at least until September next year to fight off deflationary risks in the euro area and bolster growth.

The Aussie dollar climbed 0.3 percent to 74.27 U.S. cents.

National Australia Bank Ltd.’s business sentiment index advanced to 10 last month from 8 in May as companies turned positive in all industries bar mining, a survey of 400 non-farm firms conducted June 24-30 showed.