(Reuters) - The euro hit a five-week high against a broadly weak dollar on Thursday on speculation of progress in Greek debt negotiations and after the U.S. Federal Reserve indicated interest rates would stay at ultra low levels for at least another two years. Traders said the euro was boosted by media reports that Greece's private creditors were willing to lower their "final offer" of a 4 percent interest rate on new Greek bonds in order to clinch a deal in time to avert a messy default. The new offer was reported by Greek media, without quoting any sources, and analysts said the euro was still vulnerable to any negative headlines on the talks that could prompt investors to buy back the safe haven dollar or the yen. The single currency hit a session peak of $1.3175, its highest level since December 21, and was last trading up 0.3 percent on the day at $1.3145. It had rallied from around $1.2980 before the Fed statement on Wednesday, with macro funds cited as heavy dollar sellers. The euro hit a fresh one-month high of 102.168 yen, well above an 11-year low of 97.04 yen touched on January 16. "There's a story in a couple of Greek papers suggesting private creditors might make a lower offer and I think that has helped the euro in the last hour," said George Saravelos, G10 FX strategist at Deutsche Bank. "But the focus is more on the broader low volatility environment and the fact the Fed was dovish. It would clearly be helpful if we had a result (on Greece) but focus is on the Fed. I think the dollar will stay under pressure for a few days." Higher-yielding commodity currencies also outperformed as the prospect of continued easy U.S. monetary policy and more cash injections by the European Central Bank supported investor risk appetite. The Australian dollar hit a three-month high of US$1.0688, while the New Zealand dollar traded at US$0.8232, its highest level since October 28. Federal Reserve Chairman Ben Bernanke said the U.S. central bank might consider further monetary easing through bond purchases. Policymakers also pushed back the likely timing of an eventual interest rate hike until late 2014, 18 months later than previously suggested. Investors will eye U.S. durable goods orders, initial jobless claims and new home sales data all due later on Thursday. More evidence that the U.S. economy is recovering could support riskier assets like stocks and higher-yielding currencies. The dollar gave back some of its recent gains against the yen, slipping to 77.62 following its rise to a two-month high of 78.28 yen on trading platform EBS on Wednesday. Strong technical resistance was cited around the 200-day moving average now at 78.33 yen. The dollar also dropped versus the Swiss franc to 0.9163 francs on trading platform EBS, its lowest level since early December. GREEK UNCERTAINTY Risk appetite was further supported by Italy selling the top planned amount of 5 billion euros of zero-coupon and inflation-linked bonds. The auction saw sound demand ahead of a crucial sale of five- and 10-year paper on Monday. Some analysts said although the dollar was likely to remain soft against perceived riskier currencies, investors would be wary of pushing the euro too high given concerns about the region's debt crisis. "The main surprise was they (the Federal Reserve) were unequivocally dovish in their statement which suggested they do not need data to deteriorate to justify easing monetary policy further," said Michael Sneyd, FX strategist at BNP Paribas. "We think this risk rally will last a bit longer, particularly in the commodity currencies. Against the euro there is still the overhang that we do not have any resolution to a Greek PSI agreement, euro/dollar is probably going to top out." With time slipping ahead of a March deadline when Greece faces major bond redemptions, the top negotiator for private creditors, Charles Dallara, was resuming talks with officials on Thursday, both sides said. Despite the latest bounce, analysts said the overall outlook for the euro was still shaky. Morgan Stanley strategists said in a note that any corrective rebound into the $1.3230 area in coming days should be used as an opportunity to re-establish bearish positions targeting a fall to $1.2390.

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