The dollar held steady below a one-week high against the euro on Thursday, with gains kept in check by comments from Federal Reserve chief Alan Greenspan and ahead of Friday's key U.S. jobs report.
The yen was on the back foot, hurt by rising oil prices and government data showing foreign investors turned net sellers of Japanese bonds at the end of February.
"The dollar failed to push on after Greenspan but he ensured a degree of caution in regard to selling the dollar ahead of what is a crucial employment report," said Derek Halpenny, currency economist at Bank of Tokyo Mitsubishi in London.
"The dollar is still a big figure higher than the day before yesterday," he added.
While Greenspan told Congress that the U.S. economy is growing at a reasonably good pace, his focus on budget problems rather than healthy growth disappointed dollar bulls looking for hints the Fed could speed up its credit tightening campaign.
But hopes for a strong U.S. jobs report on Friday kept the dollar supported, while the currency was also helped after another Fed official said the U.S. economy is close to full employment.
As of 3:45 a.m. EST, the euro fetched $1.3137, little changed from late U.S. levels and up from a one-week low of around $1.3088 hit on Wednesday.
The dollar rose almost a third of a percent against the yen to trade at 104.95 yen. The Japanese currency also slipped versus the euro to trade at 137.89 yen.
Securities flow data showed large scale foreign selling of Japanese government bonds in the week ended Feb. 26.
The Swiss franc traded with a weaker bias after poor economic growth data. Fourth quarter gross domestic product shrank 0.1 percent compared with a forecast for 0.2 percent growth.
PAYROLLS, PAYROLLS, PAYROLLS
Traders are setting up for Friday's U.S. payrolls report for February and betting that a hefty number of jobs were created, leaving the dollar exposed to any increase below forecasts.
Wall Street economists expect around 220,000 new jobs for February, compared with 146,000 the previous month, according to the median forecast in a poll. The jobless rate is seen unchanged at 5.2 percent.
Fed Governor Edward Gramlich said late on Thursday that the U.S. economy is getting close to "most definitions" of full employment, though he also said inflation should remain stable.
But San Francisco Fed President Janet Yellen said shortly afterwards there is still quite a bit more slack in the economy than the low jobless rate suggests.
Market players are also looking ahead to a policy meeting by the European Central Bank (ECB) later in the day.
While most believe the ECB will keep its benchmark interest rate unchanged at 2 percent, some are curious to see whether the central bank will keep its tightening bias.
The ECB has been wary on inflation due to a strong credit expansion and booming housing markets in some euro zone countries, but sagging growth in the 12-country bloc is complicating the picture.
ECB President Jean-Claude Trichet is due to hold a news conference at 8:30 a.m. EST, following its rate decision announcement at 7:45 a.m. EST.
"I doubt that they will hint at any imminent changes in rates," said Monica Fan, global head of FX strategy at Royal Bank of Canada.