* Encouraging data mitigate worries about Greece debt talks

* Euro sets for biggest quarterly loss vs dollar since 2008

* Dollar index rebounds after two weeks of losses

* Yellen’s message supports view of U.S. gradual tightening (Updates to U.S. trading, change byline, dateline, previous LONDON)

By Richard Leong

NEW YORK, March 30 (Reuters) – The euro slumped against the dollar on Monday on worries over whether Greece would secure aid before it runs out of cash in three weeks, while the greenback gained versus other currencies on the view the Federal Reserve will raise U.S. interest rates this year.

Athens sounded upbeat about talks with its creditors to release funds from its 240-billion-euro aid package while Germany called for a more detailed list of reforms.

Concerns about the negotiations were mitigated by encouraging European data. A report showed confidence in the euro zone economy rose to its highest since July 2011 and a positive reading on German inflation raised hopes the region would avert deflation.

The euro remains under pressure from the diverging policy paths of the Fed and the European Central Bank, supporting the notion it would fall to parity with the dollar this year, analysts said.

“That’s a pretty strong headwind for the euro,” said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York.

The euro zone single currency was down 0.45 percent against the dollar at $ 1.0839. This brings its quarterly decline to 10.4 percent, which would be its largest since the third quarter of 2008.

The euro fared better versus the yen, up 0.2 percent at 129.88 yen.

The dollar rebounded following comments late Friday from Fed Chair Janet Yellen which underscored the view that the U.S. central bank is likely to start raising rates gradually later this year.

The dollar index, a gauge of the greenback’s value against a basket of currencies, climbed 0.7 percent after back-to-back weeks of losses.

The greenback was up 0.8 percent against the yen at 119.98 yen, while the sterling was down 0.6 percent against the dollar at $ 1.4793.

Domestic data on personal spending and pending home sales reinforced the view the U.S. economy would grow enough for the Fed to end its near-zero rate policy.

U.S. jobs data on Friday will be the key event this week. A robust report could see investors position for tighter monetary policy sooner rather than later.

Economists polled by Reuters forecast U.S. employers likely added 245,000 workers in March with the jobless rate holding at 5.5 percent..

(Additional reporting by Ahmed Aboulenein and Anirban Nag in London; Editing by Larry King and James Dalgleish)