The dollar bobbed near recent multi-month peaks against the euro and yen on Friday, supported by comments from Federal Reserve officials that U.S. interest rates may need to rise more aggressively.
Speaking on Thursday, St. Louis Fed President William Poole said the bank would act with vigor to keep inflation at bay, while Philadelphia Fed President Anthony Santomero said policymakers could not afford to get "behind the curve."
The greenback has recovered around five percent against a basket of major currencies since January as rising interest rates have offset concerns about the record U.S. current account deficit, the driver of the dollar's three-year downtrend.
"A lot of people are putting long dollar positions back on after the hawkish comments from Poole and Santomero," said Adam Myers, foreign exchange strategist at Societe Generale.
"There is a willingness to look beyond the U.S. structural problems because of the interest rate argument.
The dollar was up 0.2 percent at $1.2826 per euro at 1135 GMT, moving closer to two-month highs around $1.2800 scaled at the start of the week. The dollar was steady at 108.60 yen, within firing range of Tuesday's 5-1/2-month peak of 108.90.
Federal Reserve Chairman Alan Greenspan is due to speak on consumer finance later in the day in what will be his third public appearance this week.