The dollar recouped some of it overnight losses in early trade today amid hopes that the end to the Iraqi conflict is nearing, analysts said.
Safe haven premiums are dropping out of the market equation, lending support to global stock markets and the dollar in the process, they added.
"One factor limiting the dollar's ability to squeeze higher is the absence of large scale speculative short-positions," said Mr Steve Pearson chief strategist at HBOS Treasury Services.
"A post-conflict dollar rally seems very dependent on turning both longer-term momentum driven accounts and attracting real money buyers," added Mr Pearson.
"The Gulf war continues to draw towards a quick conclusion - boosting hopes that the conflict can be over in a matter of days, rather than weeks or months," said Mr David Brown economist at Bear Stearns.
"It is hard resisting the temptation to be optimistic for reduced geo-political risk, and a stronger boost to economic confidence with improved chances of early economic recovery and faster growth ahead," added Mr Brown.
However, overnight comments by The Organisation of Petroleum Exporting Countries (OPEC)'s Qatari president may serve to cap the US dollar's gains.
"Some sabre-rattling from OPEC that it might aim to cut oil production at the April 24th meeting may slow the move but not stop it," said Mr Brown.
AFP