Euro underwhelmed as Greece inches forward; China data eyed

By Ian Chua

SYDNEY (Reuters) - The euro barely budged early in Asia on Tuesday, having drifted sideways overnight as fatigue mounted over a seemingly endless stream of headlines indicating progress in Greek debt talks.

The common currency last stood at $1.13430 , little changed from late New York levels but down from Monday's high of $1.14105. For its part, the U.S. dollar was aided by upbeat housing data and a jump in Treasury yields.

Against the yen, the euro was at 139.910 , having recoiled from 140.630. However, it remained in a well-worn 138.000-141.000 range seen so far this month.

While a deal remained elusive, euro zone ministers on Monday welcomed new reform proposals from Greece as a possible basis for an agreement to avert a looming default.

German Chancellor Angela Merkel said the Greek proposals were "a good basis for further talks", while International Monetary Fund's managing director, Christine Lagarde, said there was still a "huge amount of work to do".

"We wait, there is a vast amount of commentary and expectation, and even a fair degree of optimism. And nothing might happen for a few days at least," said Emma Lawson, senior currency strategist at National Australia Bank.

The optimism was more evident elsewhere, with European shares rallying strongly while peripheral bond yields dived.

With the euro on the ebb, the dollar index climbed to 94.307, from Monday's trough of 93.807. Versus the yen, the greenback fetched 123.35 , holding onto Monday's 0.5 percent gain.

The dollar also pushed higher against commodity currencies, particularly on the New Zealand dollar, which slid to a five-year low of $0.6860 .

The kiwi has been on the skids since the Reserve Bank of New Zealand surprised some by cutting interest rates earlier in the month and keeping the door open to more easing.

"The NZD downside momentum appears particularly strong despite what we see as overextended short positioning and already dovish policy expectations that are pricing in two further RBNZ cuts over the next year," analysts at BNP Paribas wrote in a note to clients.

With a definitive deal for Greece unlikely immediately, surveys of Chinese and Japanese manufacturing sector for June should provide a bit of distraction for the market.

Any signs of a pick up in China's factory activity could give commodity currencies a boost, while dampening demand for the safe-haven yen.

(Editing by Leslie Adler)