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FOREX-Euro dashes higher on reports of progress over Greece

* Euro gains in late NY trade after reports on Greece debt talks

* Euro hits 7-yr low vs British pound before Greek meetings

* Dollar at five-week high vs yen

* U.S. yields rise as Fed rate hike view strengthens (Updates with market reaction to reports of progress in EU/Greece talks)

By Gertrude Chavez-Dreyfuss and Daniel Bases

NEW YORK, Feb 11 (Reuters) – The euro advanced against the U.S. dollar late on Wednesday as conflicting reports emerged about progress between the European Union and Greece over a bailout deal due to expire at the end of the month.

Two official sources told Reuters that no deal has been reached, but that a common statement was being drafted that could leave it open for Greece to extend its current financing. A Greek official insisted there could be no extension of the deeply unpopular bailout.

Gains accrued to the euro after CNBC television, citing a source, reported an agreement was reached “in principle.”

The euro popped higher against the greenback, trading up to $ 1.1353 after the reports, from $ 1.2393. On the day, however, the euro added just 0.10 percent on the EBS trading platform .

“All we know now is that the worst case scenario, which had a low probability in the market is even lower now. Any potential worst case scenario is at least delayed,” said Sebastian Galy, senior currency strategist at Societe Generale in New York.

Luxembourg’s finance minister, Pierre Gramegna, later said the Eurogroup agreed on a way forward with Greece and that discussions would continue in the coming days.

Earlier, the euro hit a seven-year low against the British pound and was down versus the dollar before headlines started to emerge from the euro zone finance ministers’ meeting regarding Greece’s debt bailout program.

The euro ended Wednesday’s trade up 0.29 percent against the British pound at 74.36 pence after hitting its lowest in seven years.

Wednesday marked the start of tense talks between Greek Finance Minister Yanis Varoufakis and euro zone finance ministers. Greece’s new leftist-led government won a parliamentary confidence vote for its refusal to extend an international bailout.

The stepped up rhetoric ahead of the meeting had Varoufakis saying he was ready for a clash with euro zone officials over Greece’s decision to scrap austerity measures, end cooperation with various entities overseeing its bailout and demand a “haircut” for its debt burden.

On Tuesday the euro moved higher on optimism a compromise could be reached that was more acceptable to markets than Greece leaving the euro zone.

But it’s not all about Greece for the euro, which has moved within a 100-point range this week.

“Overstretched short positioning alongside what has been generally improving economic data out of the euro zone have put the breaks on downside momentum,” said Christopher Vecchio, a currency analyst at, a division of FXCM in New York.

In other currency pairs, the dollar hit a five-week high against the yen, bolstered by a rise in Treasury yields. It rose 0.87 percent to 120.47 yen. Trade was thin, with Japanese markets closed for a public holiday.

The dollar was helped by a rise in the benchmark U.S. 10-year Treasury yield, which popped above 2 percent on Tuesday for the first time in a month on views the Federal Reserve might lift interest rates by mid-2015.

(Additional reporting by Anirban Nag in London; Editing by Jeffrey Benkoe)

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