(Updates prices, adds comments; changes byline, dateline; previous LONDON)
* Draghi says central bank could adjust policy tools
* Euro hits more than 9-month high vs dollar of $1.1304
* Fed Chair Yellen to speak in London later on Tuesday
* Dollar hits more than one-month high vs yen of 112.15 yen
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Sam Forgione
NEW YORK, June 27 (Reuters) - The U.S. dollar hit a more than nine-month low against the euro on Tuesday after the head of the European Central Bank opened the door to steps that might begin to reduce the central bank’s emergency stimulus to the economy.
Speaking to a conference in Portugal, ECB President Mario Draghi said the ECB could adjust its policy tools of sub-zero interest rates and massive bond purchases as economic prospects improve in Europe.
But any change in the bank’s stance should be gradual, as “considerable” monetary support is still needed and the rebound in inflation will also depend on favorable global financing conditions, he added.
The euro’s gains briefly elevated it more than 1 percent against the greenback to $1.1304 in the U.S. morning session, marking its strongest level since Sept. 8, 2016.
“Just the fact that the ECB is considering their options right now is considered to be a hawkish signal,” said Sireen Harajli, FX strategist at Mizuho in New York.
The status of the ECB’s bond-buying program has been a key driver of the euro’s value in recent weeks. The dollar jumped against the euro earlier this month after the central bank said policymakers had not discussed scaling back its massive bond-buying program.
The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.7 percent at 96.783 after touching a 13-day low of 96.649 earlier in morning trading.
The dollar’s weakness was exacerbated after a survey showing weaker-than-expected U.S. home price acceleration in April. Recent data on retail sales, manufacturing production and inflation have given pause and housing data has been mixed.
Traders were awaiting comments from Federal Reserve Chair Janet Yellen at 1 p.m. ET (1700 GMT), when she is scheduled to take part in a discussion on global economic issues in London.
Traders expect Yellen to maintain her positive outlook on the U.S. economy despite the recent weak data, reinforcing the central bank’s plan to raise rates once more this year and three times next year.
The dollar “could be in line to rebound” on Yellen’s comments, said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, in a research note.
The dollar hit a more than one-month high against the yen, of 112.15 yen. Manimbo said traders who are bearish on the yen have the most faith in the Fed raising rates again this year. (Reporting by Sam Forgione; additional reporting by Ritvik Carvalho in London; Editing by Dan Grebler)