The dollar steadied nearly two cents away from record lows versus the euro this morning with sentiment hinged on the strength of US banks' earnings and the reception of a rescue plan for Fannie Mae and Freddie Mac.
Confidence in the US financial sector, hard-hit by the nearly one-year old credit crunch, was also boosted late last week after results from Citi, JPMorgan Chase and Wells Fargo beat low expectations.
But a flurry of earnings due this week - including Bank of America today and Wachovia tomorrow - kept investors on edge.
Treasury Secretary Henry Paulson said yesterday he was optimistic Congress would approve the government's request for authority to shore up the two troubled mortgage giants, Freddie and Fannie.
"The question is will there be some disappointment in respect to the rescue package or not. If not, that should be dollar supportive," said Michael Klawitter, currency strategist at Dresdner Kleinwort in Frankfurt.
"$1.60 still seems to be the top for euro/dollar and a break above that level really needs a clear loss in confidence in the US financial system in general," he added.
The euro edged up 0.1 per cent to $1.5888 by 11.46am.
Despite setting a record high of $1.6038 last Tuesday, the euro staged its worst weekly performance in a month last week thanks to the US bank results. It's still up nearly 9 per cent for the year-to-date though.