The dollar retained a firm tone ahead of this afternoon's release of the minutes to the last meeting of the rate-setting body at the US Federal Reserve. The market is currently expecting a near 70 pct chance of another two interest rate hikes from the Federal Open Market Committee by May, but over 80 pct of it doing so by June. At the last meeting on Jan 31, the FOMC raised its benchmark Fed funds rate a quarter point for the 14th straight time to 4.50 pct. "If these expectations are not at least confirmed by the meeting minutes, market participants might feel inclined to square their dollar longs," said Gavin Friend, currency strategist at Commerzbank Corporates & Markets. In the statement accompanying the last meeting, the FOMC seemed to go out of its way to provide incoming Fed chief Ben Bernanke with as much flexibility as possible. Since then Bernanke has sounded a moderately hawkish tone, cementing expectations that US borrowing costs have further to rise. "If the minutes are in a similar tone to that of the FOMC statement, then the dollar should stay supported rather than gain significantly," said Ian Stannard, currency strategist at BNP Paribas. "On the other hand, dovish comments, in terms of the housing market, comments on underlying inflation being contained or a limit to Fed tightening, could see the dollar come under pressure," he added. The market has read the dataflow in recent weeks as strong enough to warrant further Fed rate hikes, in contrast to expectations last month that the central bank was about to end its policy of raising rates just as Bernanke takes the helm. Over the bulk of the last few months, the euro had rallied against the dollar on a growing market view that the yield-supporting factors that helped the US currency rally in 2005 may have run their course, with the European Central Bank poised for another hike and the Fed seemingly about to pause. The ECB's president Jean-Claude Trichet all but confirmed again yesterday that the bank will raise rates another quarter point in March. The ECB raised its key refi rate in December to 2.25 pct, its first hike in over five years. He said current market expectations for higher short-term rates are "perfectly sensible", noted the upside risks to inflation and was relatively optimistic about the growth outlook in the 12-nation single currency zone. "The ECB may be reluctant to commit explicitly to additional tightening beyond March, but there can be little doubt that this is the message Trichet is trying to get across, albeit in a palatable and reasonable way," said Daragh Maher, senior forex strategist at CALYON.