FOREX-Euro bounces from 3-1/2 month lows after Fed comments

* Graphic: World FX rates tmsnrt.rs/2RBWI5E

LONDON, July 15 (Reuters) – The euro bounced off a more-than 3-1/2 month low against the U.S. dollar on Thursday after dovish comments by the Fed chief broke a recent spike in Treasury yields.

In testimony to the U.S. Congress, Fed Chair Jerome Powell said the U.S. economy was “still a ways off” from levels the central bank wanted to see before tapering its monetary support.

Against the greenback, the euro steadied at $1.1831, recovering from an early April low of $1.1772 hit before the Powell testimony in the previous session.

“Overall the comments suggest that the Fed is more likely to wait until later this year to begin tapering quantitative easing but has the option to start earlier in September,” MUFG strategists said in a daily note.

Apart from the euro, broad market sentiment remained subdued with the dollar holding strong against other major currencies.

Mixed economic data in China – showing a largely expected growth slowdown, but signs of more resilient domestic demand – also did little to improve the mood.

The safe-haven yen rose broadly, and was last up 0.1% at 109.86 per dollar and close to testing multi-month peaks at 129.91 per euro. The Aussie fell to $0.7453, while the kiwi dipped below 70 cents to $0.6998. AUD/

“The market is still on an uncertain path,” said National Australia Bank strategist Rodrigo Catril.

Against a broad basket of currencies, the greenback steadied at 92.41 despite 10-year benchmark U.S. Treasury yields extending their decline for a second consecutive session.

The Canadian dollar also weakened on Thursday – with help from softening oil prices – even though the Bank of Canada further tapered its policy support on Wednesday.

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