The dollar remained relatively steady as commodity prices, in particular gold, helped the currency recoup some of the hefty losses earlier this week. "The sharp decline in gold from yesterday's 645 usd/ounce (to around 620 usd) peak has provided the dollar with some relief allowing a corrective rebound following the recent sharp losses," said Ian Stannard, currency strategist at BNP Paribas.Despite the dollar's modest recovery, analysts expect the dollar to remain under pressure against the single currency over the medium term for a variety of reasons, primarily related to a narrowing in the interest rate differential between the US and the euro zone."Holding a short-dollar position is sensible, as I continue to expect the dollar to weaken this year for cyclical reasons," said Stephen Jen, currency strategist at Morgan Stanley. Earlier this week, the US currency slumped to a seven month low against the euro after the minutes to the last meeting of the US Federal Reserve's rate-setting body confirmed that the central bank is near to ending its two-year policy of raising interest rates. Some of that expectation was tentatively reduced after higher than expected US inflation data on Wednesday. However, analysts expect the yield gap between US and euro zone rates to narrow towards the end of the year as the Fed stops raising rates and the European Central Bank steadily raises them. The ECB has so far raised its key interest rate twice, taking the refi rate up to 2.50 pct. The dollar has also been on the back foot from the mounting geopolitical tensions surrounding the stand-off between the US and Iran. The market's attention will shift to this weekend's meeting of G7 finance ministers, where there is some speculation of a surprise currency revaluation by the Chinese. China's President Hu Jintao said yesterday when meeting US President George Bush in Washington that the government "will continue to make adjustments" in its exchange rate regime. Last July, the Chinese authorities abandoned the yuan's peg with the dollar, and linked the currency to a basket of currencies. The move immediately resulted in a 2.1 pct appreciation in the value of the yuan, which had been pegged at about 8.28 yuan to the dollar for the past decade, but is now traded at around 8.08 yuan to the dollar. The step was widely seen as a political move by China aimed at appeasing trading partners like the US and was widely praised by governments and economists as the "first step" toward greater flexibility in China's forex regime. But not much has happened since, fuelling disappointment in the US, in particular, which is experiencing a record trade shortfall with the Chinese.