The dollar held near a two-month high against the euro on Wednesday, supported by data that showed capital flows into the United States in November were more than enough to fund its huge trade deficit.
That helped the market to keep its focus on the improving interest rate advantage the United States has over other countries.
"The weakening trend in the dollar from the end of last year is starting to change," said Kikuko Takeda, currency analyst at the Bank of Tokyo-Mitsubishi.
"We're seeing repositioning in the euro/dollar that favors the dollar, as a firmness in the U.S. economy is giving rise to talk of rising interest rates."
Still, market participants said the dollar was poised for more losses versus the yen after hitting a five-year low earlier in the week as traders took to heart Europe's view that Asian currencies should share the burden of recent dollar weakness.
Such criticism by Europe -- targeted at China -- comes ahead of a meeting of finance ministers from the Group of Seven industrial powers that is expected to add pressure on China to revalue the yuan.
Analysts say that the yen, which is already on the verge of a nine-year high against the dollar, has the most to gain from concerns that Asian currencies are not pulling their weight. Traders buy the yen as a proxy for other Asian units because it is the most liquid in the region.
At 10:05 p.m. EST Tuesday, the dollar traded at $1.3030 per euro, slightly lower than late levels in New York, but well within range of a two-month high of $1.2995 hit overnight.
It was also little changed against the Japanese currency, fetching 102.35 yen after rising to around 103 yen in New York.
Having hit a five-year low of 101.67 yen on Monday, the dollar was about one yen away from a nine-year low of 101.24 yen.
The euro fetched 133.40 yen, firming a tad from New York levels around 133.15 yen after the market failed to push the single currency below 133 yen.
Analysts said that the euro's weakening trend against the Japanese currency remained intact and that it was just a matter of time before a firm break under 133 yen sent the euro/yen to a four-month low.
But some said comments about Asian currencies alone wouldn't boost the yen, but rather, a yen-positive factor, such as a solid rise in Japanese stock prices, would be needed.
"Speculation over further pressure on Asian economies to liberalise forex regimes may grow ahead of the G7," said Naomi Fink, senior currency strategist at BNP Paribas.
"But that alone isn't likely to make or break the euro's downside move past 133 unless we see another rally in the dollar versus the euro." (Reuters)