The dollar stuttered on Thursday, failing to hold on to gains registered after Federal Reserve Chairman Alan Greenspan indicated the day before that U.S. interest rates would continue to rise.
Greenspan provided no surprises in his Congressional testimony on Wednesday as he reiterated that the U.S. economy is expanding at a healthy pace and that the fed funds rate remained low in real terms despite recent hikes.
At 3:22 a.m. EST, the dollar was down 0.18 percent against the euro at $1.3051, and down 0.11 percent against the yen at 105.39.
The dollar has eased about 2.5 percent against the euro since last week, when it hit a three-month high around $1.2730.
An initial climb took the dollar to around 105.75 yen and $1.2960 versus the euro right after Greenspan said U.S. interest rates remained "fairly low" at 2.5 percent after six consecutive rate rises by the Federal Reserve since June.
"People are very confused which way to push euro/dollar now," said Lee Ferridge, senior proprietary trader at Rabobank. "The dollar is caught between two opposing camps, structural concerns and cyclical economic strength."
Some market watchers feel that Greenspan did not give any hint on whether the Fed would change its stance in the near-term on raising rates at a "measured pace" or stick to more accommodative monetary policy.
"Our view remains that we will see 3.25 percent Fed funds by the end of June, with three more 25 basis points rate rates," Standard Chartered said in a research note.
The market will scrutinise U.S. weekly jobless claims and U.S. import-export prices for January, both out at 8:30 a.m. EST, and U.S. leading economic indicators for January at 10 a.m. EST, for further clues on U.S. economic growth and inflation.
The Philadelphia Federal Reserve Bank's February business activity survey is due at noon EST.
Sterling traded up 0.19 percent versus the dollar at $1.8849 ahead of the release of January British retail sales data at 4:30 a.m. EST.
European Central Bank Executive Board member Tommaso Padoa-Schioppa in a newspaper interview said low interest rates in the euro zone have pushed up property prices in the bloc and that a close watch was warranted on expansionary monetary policies.
The currency market reacted little to the Bank of Japan's decision to keep monetary policy unchanged on Thursday, though statements by central bank officials in recent weeks had sparked talk that the BOJ could alter its liquidity target.