The dollar gained ground against the euro and yen on Thursday, with market players reluctant to bet against the greenback after its surprising strength in the face of poor economic news.
The U.S. currency slipped against the euro after weaker-than-expected retail sales data on Wednesday but soon rebounded, as it did on Tuesday after the U.S. trade deficit hit a new monthly record.
"We've had two bad U.S. numbers in the past two days and euro has plummeted after both of them," said Lee Ferridge, senior proprietary trader at Rabobank.
"The market is worried that there are big sellers out there that you can't explain and people are reluctant to be long on the dollar given the speed of the moves in the past few days -- and you can't blame them," he added.
Rumours that billionaire investor Warren Buffett was buying back the dollar after having made massive bets against the U.S. currency prompted traders to tread cautiously. Buffett wagered $21.4 billion against the dollar last year.
By 0800 GMT, the dollar was up a third of a percent against the euro and the yen at $1.2875 and 107.70 yen respectively.
Markets will also be closely monitoring Federal Reserve Governor Ben Bernanke's speech on "The global saving glut and the U.S. current account deficit" later on Thursday.
Investors will be looking for clues on inflation risks and the Fed's monetary outlook ahead of U.S. capital flows figures on Friday, which are forecast to show the country attracted $65 billion in foreign capital in February.
That's down from $91.5 billion in January but above the roughly $55 billion needed each month to cover the current account deficit.