The euro slipped against the dollar today, losing a bit of momentum after an earlier rally sparked by comments from European Central Bank officials repeating their warnings about persistent inflation.
Analysts said trading was choppy this morning with price action having little conviction, adding that they expect currencies to stray little from current trading ranges ahead of a key Federal Reserve interest rate decision on Wednesday.
Today, ECB President Jean-Claude Trichet and Governing Council member Yves Mersch both said risks to price stability remained on the upside, with Mr Trichet adding that there were no grounds for complacency.
Their comments suggested the ECB is not ready to start cutting interest rates from 4 per cent soon, even with regional data pointing to a likely negative monthly reading on German inflation for April.
A surprise jump in a German consumer sentiment gauge had also helped the euro overnight, suggesting the euro zone's biggest economy may be in better shape than indicated by last week's weak Ifo business confidence survey.
"We had a relatively strong reading in German consumer confidence and that helped ease concerns about a faltering German economy following last week's disappointing Ifo number," said Omer Esiner, a market analyst at Ruesch International in Washington.
"I think there were some hawkish comments by Mr Trichet and also by Mr Mersch and that sort of underpinned the euro a little bit. Finally, there is also a bit of profit-taking in the dollar after its nice rally last week," he added.
In early New York trading, the euro was flat at $1.5609, though still more than 3 cents below last week's record high.
Meanwhile, rising commodity prices - with oil hitting a new record high kept the dollar on the back foot.