GLOBAL MARKETS-Dollar, bond yields bounce, then fade after Yellen testimony

LONDON/NEW YORK (Reuters) - The dollar edged lower and bond yields fell after U.S. Federal Reserve Chair Janet Yellen said on Tuesday 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.

In a subtle change of emphasis in how the Fed has been speaking about its plans for rate increases, Yellen said its 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.

"It's pretty evenhanded," said Thomas Simons, money market strategist at Jefferies & Co. "She is trying to increase flexibility in policy and forward guidance and doesn't want to be nailed down as hawkish or dovish. The choppy market reaction indicates she succeeded because we are having a hard time interpreting that."

The greenback jumped initially but paired gains and was later up 0.02 percent against a basket of currencies <.DXY>. U.S. 10-year Treasury yields initially rose to about 2.11 percent, but subsequently declined to 2.05 percent.

Wall Street stocks moved higher. The Dow Jones industrial average <.DJI> was up 65.47 points, or 0.36 percent, at 18,182.31. The Standard & Poor's 500 Index <.SPX> was up 3.75 points, or 0.18 percent, at 2,113.41. The Nasdaq Composite Index <.IXIC> was up 1.32 points, or 0.03 percent, at 4,962.29.

Gold fell to near a seven-week low of just below $1,200 an ounce. Expectations for rate hikes this year have curbed gold's safe-haven appeal in recent weeks.

European stocks <.FTEU3> headed for a sixth day of gains after Greece delivered its proposed reforms to the Eurogroup, the euro zone's finance ministers. If the list is approved, Greece will get a four-month extension of its financial lifeline. [ID:nA8N0VM00T]

Greece's stock market <.ATG>, which was closed on Monday, jumped nearly 10 percent, hitting a three-month high. Greek , Italian and Spanish bond yields all edged lower as the latest bout of euro zone break-up jitters eased.

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 U.S. crude up 55 cents at $50.00 and Brent in London up to $60.09 a barrel.

Modest 0.4 percent gains for European shares took the benchmark FTSEurofirst 300 index <.FTEU3> to a seven-year high.

Asian share markets crept higher overnight. Tokyo reached another 15-year peak and MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> ended flat.

(Additional reporting by Wayne Cole in Sydney, Manolo Serapio Jr in Singapore; and Alistair Smout in London; Editing by Larry King and Dan Grebler)

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