The dollar retained a weak bias on Wednesday, sticking near the previous session's three-year low against the yen with many traders doubting Group of Seven finance ministers would agree measures to halt its slide.
The euro moved in a limited band but was well supported after data confirmed that business activity in the eurozone's services sector picked up speed despite the euro's appreciation.
"They confirmed European recovery and convinced the market about the euro's strength," said Shahab Jalinoos, senior currency strategist at ABN Amro.
By 1255 GMT, the euro was steady at $1.2540 after gaining one percent the previous day.
The Reuters Eurozone Business Activity Index rose to 57.3 from 56.6 in December, adding evidence that business activity in the region's services sector picked up speed, although it remained below a three-year high of 57.5 in November.
Traders are ready to compare eurozone activity with US services data. The Institute for Supply Management's (ISM) January index of US non-manufacturing activity and December factory orders are released at 1500 GMT.
US Treasury Secretary John Snow is due to testify on the 2005 budget before the House Budget Committee at 1900 GMT. His testimony to the Senate committee on Tuesday was postponed.
Against the yen, the dollar was steady, standing at 105.32 yen, and not far off a three-year low around 105.20 hit on Tuesday.
Analysts broadly expect G7 ministers, meeting in Florida later this week, will not vary the tenor of their reference to currencies significantly from the wording of a communiqué released after their meeting in September.
"Wording is expected to be very vague, so it won't be a guidance to the market, and what we have to look at is how Asian central banks will react after G7," said Hans Redeker, chief forex strategist, at BNP Paribas.
"Asian central banks are expected to continue aggressive intervention, and this might push European currencies higher," he said.
The market focus was whether the statement would make reference to currency stability.
"If they keep (a reference to "flexibility") in, the yen will see further upward pressure, though Japan will be unhappy about it, " said Mary Davis, global currency strategist at CSFB.
Despite the G7 call in September, Japan has loudly protested against export-damaging yen strength, with the authorities suspected of intervening to curb yen gains on Tuesday in Tokyo and London.
Finance Minister Sadakazu Tanigaki and top financial diplomat Zembei Mizoguchi repeated their warnings, saying currency moves should reflect fundamentals and move stable.
Government adviser and Mizoguchi's predecessor Haruhiko Kuroda said the impact of a higher yen on the Japanese economy could have significant global implications and the G7 shared Japan's concerns.
However, many think Washington is happy with a weaker dollar as it helps problems of disinflation and the current account deficit.
Major currencies were quiet as investors grew cautious ahead of a batch of rate decisions from the European Central Bank (ECB), Bank of England (BoE), Bank of Japan (BoJ) all due on Thursday, and Sweden's Riksbank on Friday.
The ECB is not expected to cut interest rates although latest data suggests euro zone inflationary pressures remains tame, while the BoE is expected to raise its key rate by a quarter point to 4.0 percent.
Caution was also looming ahead of a key US jobs report on Friday. Non-farm payrolls, forecast to rise 150,000 in January compared with just 1,000 in the previous month, are closely eyed as an improving labour market could hold the key to the timing of a rate hike in the United States.
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