The dollar edged up slightly after suffering sharp falls yesterday, though trade was subdued on a public holiday across much of Europe today and as the market awaited the latest ISM survey on US manufacturing activity this afternoon.
The US currency yesterday fell to five-week lows against the euro and the yen and to 12-week lows against the pound, after a weak Chicago PMI reading and US consumer confidence data caused many to downgrade their estimates for today's ISM survey.
"It is with a relatively negative bias on the dollar that the market now braces itself for the day's key economic release the October ISM," said Neil Mellor at the Bank of New York.
Even if the ISM headline reading were to come in on the stronger side of expectations, any boost to the dollar is likely to be short-lived ahead of what is expected to be a hawkish European Central Bank press conference tomorrow, he said.
The ECB is fully expected to leave interest rates on hold tomorrow at 3.25 pct, but ECB president Jean-Claude Trichet is widely forecast to signal a further interest rate hike in December.
"There is the distinct possibility of the dollar being subjected to further bouts of pressure before the week is out," Mellor said.
Elsewhere, the pound was little changed after a key survey released this morning of UK manufacturing activity dipped slightly below expectations.
The monthly purchasing managers' index for the manufacturing sector from the Chartered Institute of Purchasing and Supply fell to 53.7 in October from a revised 54.5 in September, against forecasts for a more modest decline to 54.0.
The weaker figure, however, will not alter the market's expectations that the Bank of England will raise interest rates again next week.