The euro hovered near a three-month low against the dollar today before comments from Federal Reserve Chairman Ben Bernanke that may provide clues about whether US interest rates will keep rising.
The market also awaited US consumer price data for June to see if inflation risks could prompt the Fed to raise rates again, after US data yesterday showed a hefty rise in producer prices in the same month.
Traders said bubbling expectations that the Fed could lift rates for an 18th straight time to 5.5 per cent next month would keep supporting the dollar, along with flows into the currency as tensions in the Middle East escalate.
Earlier today, the euro inched down to $1.2495, just off the three-month low of $1.2473 touched on electronic trading platform EBS yesterday.
The euro was little changed at 146.70 yen. It struck a record high of 147.42 yen at the start of the month.
Mr Bernanke is scheduled to testify before the US Congress on the Fed's semi-annual monetary policy report from 2pm this afternoon.
Before that, US CPI data is due out, with the core CPI likely showing a rise of 0.2 per cent in June from the previous month, according to some forecasts.
"Given the strong PPI figure, solid CPI data could push the Fed towards another rate rise," said Hideaki Furumaya, forex manager at Trust and Custody Services Bank.
Fed funds futures indicate a roughly 50 per cent chance of a rate rise next month.
Dealers said the dollar was also supported as the conflict between Israel and Lebanon-based Hizbollah continued to prompt investors to sell-off riskier overseas assets and convert the cash into the US currency.