The dollar held near a seven-week high against the euro this morning as investors awaited upcoming US data that could further cool expectations for the Federal Reserve to trim interest rates later in the year.
Revised US data on first-quarter growth later in the session precedes key indicators today, including the May payrolls report and a snapshot of manufacturing activity that will show whether the economy is picking up.
The dollar has clawed back from a record low hit against the euro in April and a 26-year low against the pound as worries about the economy's health have eased, reducing speculation of lower rates that would erode the US currency's yield appeal.
Analysts said investors remained nervous about the outlook for equity markets and the potential for another rush out of risky assets that could prompt an unwinding of carry trades, in which low-yielding currencies such as the yen are used to fund purchases of higher-yielding currencies and assets.
The euro was steady near $1.3435 after falling to $1.3406 the previous day, its weakest since mid-April. A break of $1.34 would likely trigger a deeper pull-back in the euro, traders said.
The dollar slipped to 121.50 yen from near 121.60 yen in late New York trade, partly on selling by Japanese exporters but was still near the 3-1/2-month high of 121.89 yen struck last week.
The single European currency also dipped against the yen to 163.25 yen from 163.40 yen, holding near the all-time peak of 164.02 yen hit last week.
Minutes from the Fed's May meeting released on Wednesday showed that policymakers felt inflation was their main worry and that growth should recover as the year drags on.
The Fed has held rates steady for nearly a year at 5.25 per cent even as investors had expected the housing market troubles to lead to a rate cut, and with the European Central Bank and Bank of England seen raising rates further.