The euro was trading at $1.2605, up 0.1 per cent, having hit a three-month low of $1.2456 yesterday.
Federal Reserve chief Ben Bernanke's remarks yesterday erased the dollar's gains made after a higher-than-expected rise in US consumer prices, pulling it down from three-month highs against the yen, euro and Swiss franc.
"We are seeing some consolidation. The market was positioned for a hawkish testimony and price action across markets was to unwind the move since Monday," said Adarsh Sinha, currency strategist at Barclays Capital.
"What matters for the US interest rate expectation is obviously data. If data comes out on the upside we might see another leg of dollar strength."
US interest rate futures were pricing in a roughly 65 per cent chance of another quarter-point hike to 5.5 per cent on August 8th, down from around 90 percent immediately after the CPI data.
The Fed raised rates for a 17th straight time last month.