FOREX-Dollar recovers after posting largest fall in more than a year

* Dollar index rises 0.25 percent in European trade

* Optimism about Greece debt proposals starting to wane

* New Zealand dollar helped by RBNZ comments (Adds details, quotes)

By Anirban Nag

LONDON, Feb 4 (Reuters) – The dollar index rebounded on Wednesday, after suffering its biggest one-day fall in over a year, helped by a jump in Treasury yields and expectations for upbeat U.S. economic data later in the day.

The New Zealand dollar was one of the biggest movers, rising more than 1 percent and bouncing from recent four-year lows, after central bank Governor Graeme Wheeler disappointed investors who expected a dovish tone.

While some other central banks including Australia have cut interest rates, Wheeler said in a speech he expected to keep rates on hold given the New Zealand economy remained strong.

The dollar index was up 0.25 percent at 93.826, having shed 0.9 percent on Tuesday, its biggest one-day fall since October 2013.

Investors trimmed long dollar positions and booked profits but that may be coming to an end, given expectations of monetary policy divergence between the United States on one hand and the euro zone and Japan on the other.

The euro’s recovery, driven by expectations that Greece may secure a new debt deal, showed signs of running out of steam. With EU policymakers appearing cool to Greek proposals, optimism regarding a deal could soon fade, traders said.

The euro was down at $ 1.1450, having risen to $ 1.1534 on Tuesday. It was still well above an 11-year trough of $ 1.1098 set last week.

“We have seen a shakeout of some stale long dollar positions and lightening of short euro positions on hopes of a new Greek deal,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.

“The dollar bid bias remains in place and if we continue to see good jobs data as well as earnings improve in the United States in the coming days, that could bring the shine back to the dollar.”

Investors will keep an eye out for the monthly ADP private payrolls and ISM non-manufacturing figures later in the day. On Friday, U.S. non-farm payrolls data will be released.

U.S. yields jumped on Tuesday, marking their biggest one-day rise in more than 14 months, Reuters data showed, lending some support to the dollar.

Commodity currencies remained in the spotlight with crude oil up about 19 percent over the past four sessions. Oil’s recovery helped spur a rally in risk assets, although that was showing signs of waning.

“It feels a little strange seeing crude oil and equities move in tandem, as higher oil under normal circumstances would slow economic growth. But we just have to go with the flow, and brace for ‘risk on’ when oil goes up,” said Bart Wakabayashi, head of forex at State Street in Tokyo.

The Australian dollar hovered around 78 U.S. cents, staging a turnaround after hitting a six-year trough of $ 0.7627 in the wake of Australia’s unexpected interest rate cut on Tuesday. The New Zealand dollar was up at $ 0.7400.

(Additional reporting by Shinichi Saoshiro; Editing by Susan Fenton)