The dollar steadied in early trade after a renewed bout of weakness in the wake of US Fed chairman Mr Alan Greenspan's apparent lack of concern at the currency's slide, dealers said.
Euro-dollar remained above $1.28 but the dollar was not showing signs that it was about to tumble further.
Mr Greenspan's testimony before Congress yesterday lay the groundwork for a continued period of dollar weakness, analysts said.
The dollar's falls were triggered when Mr Greenspan stated that the dollar's slide has so far had "no material adverse side effects" on US assets.
"It is important to note that Greenspan was not endorsing a dollar free-fall but rather demonstrating the lack of inflationary pressure generated by the dollar's decline," BNP Paribas analysts said.
Still, the net effect was the same with market participants driving the US currency lower.
Mr Steve Pearson, chief currency strategist at HBoS Treasury Services said Mr Greenspan "appeared to come close to an implicit endorsement of a weaker dollar."
Mr Pearson noted that markets were surprised by Mr Greenspan's remarks on currency as Fed Chairman rarely touches on the subject except in the broadest terms.
Mr Greenspan speaks again today, this time appearing before the Senate, while US Treasury Secretary John Snow gets his chance to put the gloss on the currency issue in his Budget testimony. Both events will be closely monitored.
There is also economic data of some importance today, with US weekly jobless claims and retail sales up for release this afternoon.
Sterling continued its fine run to close in on 12 year highs against the dollar. The pound hit $2 briefly in 1992 when it came out of the exchange rate mechanism.
