The dollar rose to a one-week high against the euro on Thursday but stayed in recent ranges as investors, wondering how high US interest rates will climb, looked ahead to next week's Federal Reserve meeting.
The dollar has bounced back against other major currencies in recent sessions as investors took upbeat comments on the economy and housing market from Fed Chairman Ben Bernanke as a sign that rates could rise beyond an expected hike on March 28.
Bernanke said on Monday the economy should keep growing at a brisk pace even if the housing market slowed. "Bernanke definitely left the door open (for more rate hikes) so that is supporting the dollar and also making people unwilling to maintain long euro/dollar positions ahead of next week," said Niels Christensen, senior currency strategist at Societe Generale in Paris.
The greenback fell sharply last week to a two-month low versus the euro after soft inflation data suggested the Fed may be close to ending its tightening campaign.
Christensen said there was some unwinding of positions from investors who had expected the dollar to extend last week's slump, past $1.22 per euro, and had been disappointed by the recent currency movements.
By 1215 GMT, the euro was down around 0.2 percent on the day and one percent on the week at $1.2056, close to a one-week low of $1.2049 hit earlier in the session.
The dollar was also a touch firmer against the yen at 117.04 yen.
Strategists said the yen was also weakened by comments from two US senators visiting Beijing, who took a less aggressive tone in calling for China to loosen currency controls than some had expected.
"Dollar/yen is slightly higher, perhaps as a consequence of that, with some of the comments sounding a little bit more hopeful in the sense of them not pushing on the anti-China trade legislation that they've brought to Congress," said Steve Barrow, currency strategist at Bear Stearns. "But we'll have to see what happens when they get back (to the US)."
Elsewhere, the New Zealand dollar rebounded from 21-month lows after data showed the country's current account deficit came in at NZ$3.38 billion in the fourth quarter, less than forecast. The kiwi rose as high as $0.6293, pulling away from a 21-month low of $0.6174 struck the previous session.
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