The dollar held steady against the euro on Thursday as investors remained reluctant to make big bets ahead of key US jobs data on Friday, while the yen weakened on the back of persistent oil price concerns.
Investors were especially cautious after Wednesday's US Institute of Supply Management non-manufacturing survey showed a weak employment reading, even though the report painted a fairly robust picture of the service sector as a whole.
In Europe, sterling slipped after the Bank of England raised interest rates by a quarter point, as expected, and said there were signs of housing market easing and that inflation was likely to fall back in the near term. The euro showed no reaction after the European Central Bank kept rates steady.
Meanwhile, markets remained focused on the health of the US labour market, after some weak employment components in manufacturing and non-manufacturing surveys in the past week, as well as the yen's struggle with soaring oil prices.
"The focus is on tomorrow's payrolls data. We had some action after yesterday's ISM services index. Since then it's range-bound in most of the foreign exchange market," said Niels Christensen, currency strategist at Societe Generale in Paris. "With the yen, if anything, it is the higher oil prices. But it is very quiet."
By 1204 GMT, the euro traded at $1.2042, little changed from late New York levels, after having dipped to a seven-week low around $1.1970 on Wednesday.
The dollar traded a quarter percent higher at 111.35 yen.
Sterling traded down a quarter percent at $1.8201 and a touch lower against the euro at 66.11 pence. The pound had also softened a touch after official data showed British manufacturing output unexpectedly fell in June.
Also on the radar screen is US initial jobless claims data due at 1230 GMT on Thursday. Economists expect claims to have fallen to 340,000 last week from 345,000 a week earlier.
Although Federal Reserve Chairman Alan Greenspan has said he sees the US economy entering a sustainable expansion after a slowdown in June, a recent mixed bag of US data has made the market hesitant.
In addition to Wednesday's non-manufacturing ISM numbers, a weaker than expected employment component to Monday's manufacturing ISM and last week's Chicago Purchasing Managers survey have fuelled doubts.
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