The dollar held steady against euro on Thursday, ahead of economic data that could shed light on the future path of US interest rates. The yen, meanwhile, fell after the Bank of Japan governor said it was too soon to raise rates from near zero, suggesting the cost of borrowing is unlikely to rise yet while US and eurozone monetary policies are tightened.
Investors were looking ahead to US inflation data at 1330 GMT, with core prices forecast to rise by an annual 2.1 percent in February. Housing starts data for February are also due.
The Federal Reserve is widely expected to raise rates later this month and again in May, from 4.50 percent, although the dollar has been sensitive to any data or policymakers' comments highlighting the risks to such a view.
"People are holding their breath for US numbers later today," said Adarsh Sinha, FX strategist at Barclays Capital.
By 1305 GMT, the euro was steady against the dollar at $1.2075, after hitting 1-1/2 week high of $1.2088. Traders said the euro was capped by strong technical resistance at $1.21.
The euro also rose a third of a percent against the yen at 142.12 yen. The dollar gained 0.28 percent to 117.67 yen.
BOJ Governor Toshihiko Fukui's comments, after the central bank abandoned its super-loose monetary policy last week, drove the yen down to day's lows against the dollar and the euro.
"Fukui's comments were somewhat surprising. Fukui turned a bit dovish. The fact they've ended quantitative easing, doesn't really mean anything until they start raising rates," Barclays Sinha said.
The euro got a brief lift from a news report that suggested the European Central Bank would raise interest rates further, possibly as soon as May.
News agency Market News, citing "well-informed sources", said the ECB would gradually raise rates to a neutral level - seen at 3-4 percent - with the next move possible in May.
The euro showed little reaction to final February inflation data from the eurozone, which was unchanged from the flash estimate, at 2.3 percent year-on-year.
Inflation staying stubbornly above the ECB's 2 percent target is a key reason behind the current rate tightening cycle in the eurozone where rates are seen rising to 3 percent by year-end from the current 2.50 percent.
Elsewhere, Swiss and Norwegian central banks both raised interest rates by 25 basis points, to 1.25 and 2.50 percent respectively.
After the rate hike, the Norwegian crown fell against the euro and the dollar after Norges Bank cut the 2006 core consumer inflation forecast.
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