The dollar rose against the euro this morning after minutes from the Federal Reserve's latest policy meeting stoked expectations that the central bank will raise interest rates again later this month.
Minutes released last night from the May 10th meeting show that policy makers were not sure how much higher rates should climb, if at all, but a mention that inflationary pressures were increasing helped boost expectations that rates would rise.
On the back of that the dollar rose 0.3 per cent to $1.2762 to the euro and 0.5 per cent to $1.8698 against sterling.
The minutes offered an incentive to buy back the dollar in a market rattled by concerns about the recent sell-off in world share markets and uncertainty about US currency policy under Treasury secretary nominee Henry Paulson.
President Bush on Tuesday named Mr Paulson, chairman of investment bank Goldman Sachs, to succeed John Snow as Treasury chief.
The US currency came under pressure after calls in April from the Group of Seven economic powers for appreciation in Asian currencies sparked speculation that Washington wants a weaker dollar to stem the ballooning US current deficit.
The yen shrugged off news that Moody's Investors Service upgraded its rating outlook on Japan's domestic debt to positive from stable due to an improving economy and fiscal reform efforts.