The dollar inched lower today as dealers worried about whether the currency could sustain a two-month rebound even after the Federal Reserve reiterated its commitment to raising interest rates.
The dollar had rebounded from a six-week low against the euro yesterday after South Korea's central bank and Japan's Ministry of Finance said they would not sell dollars to diversify their foreign currency reserves.
Minutes from the Fed's February 2nd meeting, released yesterday, had also supported the dollar by reiterating the Fed would raise rates at a measured pace, but could move faster if inflation risks increased.
But dealers said the dollar had failed to sustain its gains as many traders were still wary about calling an end to the currency's three-year downtrend despite its rise over the past two months.
The dollar has clawed back from heavy losses to gain over 2 per cent against the euro and the yen so far this year, as rising short-term US interest rates helped to overshadow persistent worries about US deficits.
The euro had edged up around 0.2 per cent to $1.3240 by early this morning, but was short of yesterday's six-week high of around $1.3260 and still well below its record $1.3670 struck in December.