* European shares head for biggest rise in over a month
* Dollar nudges higher amid talk of Fed rate hike
* Aussie dollar tumbles on rate cut talk
* Euro zone meets on latest Greek aid deal
* Wall Street set for modest rise as dollar gains
By Marc Jones
LONDON, May 24 (Reuters) - European shares were heading for
their best day in over a month on Tuesday as the waiting game to
see whether the U.S. raises interest rates again next month sent
the euro to its lowest since March.
Asian shares had stumbled to near 2-1/2-month lows overnight
but Europe jumped as the weaker euro EUR= , hopes for a swift
Greek aid deal in Brussels later and confirmation Germany's
economy had a solid start to the year lifted spirits.
Britain's FTSE 100 .FTSE , Germany's DAX .GDAXI and
France's CAC .FCHI had climbed 0.8 to 1.5 percent ahead of
U.S. trading where Wall Street's main markets were expected to
start 0.3-0.4 percent higher too.
Even Russia .IRTS managed to fend off wobbling commodity
prices to carve out gains.
The U.S. dollar .DXY pushed the euro down to $1.1165 as it
touched its highest against the world's other top currencies
since late March. It was the Australian dollar that really
caught the eye, however, as speculation about more rate cuts
there triggered its heftiest fall in 4-1/2 years.
FRX/
New Zealand's dollar, which tends to follow the Aussie's
movements, also fell 0.7 percent to a two-month low of $0.6706
NZD=D4 , while oil exporter Canada's dollar hit a seven-week
low CAD=D4 , underscoring ongoing market uncertainty.
"Everyone is worried about a June hike from the Fed," said
Allianz (DE:ALVG) Global Investors' emerging markets portfolio manager
Shahzad Hasan.
"I think what is more important is the language if they do
hike. Do they continue or do they stop after June, and what is
the trajectory for the Fed funds rate in 2017."
U.S. Treasury yields inched higher again. European 2-year
yields ticked up too, but there was a drift down in longer
10-year benchmarks as Greece's borrowing costs GR10YT=TWEB
hovered at their lowest in six months.
Hopes were building that euro zone finance ministers may be
able to agree a new aid plan for Athens later without the
last-minute panics that have typified previous discussions.
Greek lawmakers on Sunday approved tax increases and a new
privatisation fund to pave the way for a deal, leaving the onus
on the rest of the bloc as the International Monetary Fund
reiterated its demands for full-blooded debt relief.
"Providing an up-front, unconditional component to debt
relief is critical to provide a strong and credible signal to
markets," a report from the Fund's staff said. COMMODITIES
Wall Street's expected bounce was after a lower close on
Monday when the jitters about the Fed overshadowed a rebound in
Apple shares (NASDAQ:AAPL).
Investors will be keeping an eye on economic data. New home
sales due at 10 a.m. ET (1400 GMT) are expected to have
increased 2 percent to a seasonally adjusted annual rate of
523,000 units in April. Manufacturing and services data are also
due to be released. ECONG7
Overnight in Asia, Chinese .SSEC and Japanese .N225
stocks lost 0.7 percent apiece, though some investors were wary
of chasing markets lower after their recent retreat.
Yang Hai, an analyst at Kaiyuan Securities, said trading was
likely to remain dull for a while amid economic sluggishness.
"The current economic environment doesn't justify a
sustainable rebound. In addition, regulators are reducing
leverage in the asset management industry so money is not
flowing in."
Oil prices clawed up to $48.52 a barrel LCOc1 and 48.36
for U.S. crude WTI CLc1 , having earlier been on course for
fifth day in the red. It was thin trade though and the dollar's
strength and talk of Iran upping production kept the pressure
on.
The strong dollar also took its toll on gold ZAU= , which
dipped to a 3-1/2 week low, and copper CMCU3 , which neared a
three-month low.
Philadelphia Fed President Patrick Harker said on Monday a
rate hike in June would be appropriate unless data weakens,
while St. Louis Fed President James Bullard said holding rates
too low for too long could cause financial instability.
Fed Chair Janet Yellen will appear at a panel at Harvard
University on Friday, a day on which investors will also see the
second estimate of U.S. first-quarter growth.
"We are seeing more dollar strength and a lot of it against
the smaller currencies," said Saxo Bank FX strategist John
Hardy. "The Chinese authorities are keeping the yuan exchange
rate quiet, too, which is giving the Fed the room to wax lyrical
and be as hawkish as they are being."
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Poland, Hungary market performances http://tmsnrt.rs/25jBePC
Global assets in 2016 http://reut.rs/1WAiOSC
Currencies in 2016 http://link.reuters.com/tak27s
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(Editing by Robin Pomeroy)