Dollar lower; rate hike view in focus

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The dollar fell on Wednesday after paring earlier losses while U.S. 10-year Treasury yields dipped as investors' focus slowly shifted from Greece to prospects for higher U.S. interest rates.

The outlook for the dollar remained upbeat despite Wednesday's retreat. The U.S. currency has benefited overall from another round of generally positive data this week, which supported the view that interest rates in the world's largest economy were likely to rise sooner than later.

Wednesday's data on U.S. gross domestic product confirmed the improving outlook. The final figure for the first quarter showed contraction in the economy was less than previously estimated.

The euro 'will bounce back' on a deal

GDP fell at a 0.2 percent annual rate in the quarter instead of the 0.7 percent pace of contraction reported last month.

This "will bode well for the 2015 average and suggests Q2 was entered with better momentum than originally assumed," said Omer Esiner, chief market analyst of Commonwealth Foreign Exchange in Washington.

In afternoon New York trading, the dollar index was down 0.19 percent at 95.25.

On Tuesday it had its strongest daily performance since late May, climbing as much as 1.2 percent. It hit a daily peak of 95.636, its highest level since June 12.

Read MoreGreece divided over reforms and future

The dollar benefited on Tuesday from reasonably strong U.S. data; comments from Federal Reserve Governor Jerome Powell, who said he was prepared to raise interest rates twice this year; and higher U.S. yields .

News of the remaining differences between Greece and its euro zone creditors pulled the euro off highs of earlier in the day. It was still up 0.34 percent at $1.1207, though, regaining a bit of ground after sliding 1.5 percent on Tuesday.

Greek Prime Minister Alexis Tsipras flew to Brussels to meet euro zone officials on Wednesday to try to bridge gaps on key elements of the proposals made by his left-wing government to shore up state finances in return for vital loans.

Athens had proposed increasing value-added and corporate taxes to help meet budget targets, but Tsipras told aides that creditors had not accepted the revenue-raising measures, a Greek government official said.

Tsipras meets European Central Bank President Mario Draghi, IMF head Christine Lagarde and European Commission President Jean-Claude Juncker on Wednesday afternoon before a 1700 GMT meeting of the Eurogroup of finance ministers.