NEW YORK (AFP) — The dollar kept a firm footing Wednesday, riding momentum from hawkish comments a day earlier by Federal Reserve chairman Ben Bernanke, as players looked ahead to a European Central Bank meeting.
At 2100 GMT, the euro was at 1.5440 dollars, down slightly from 1.5449 in New York late on Tuesday.
Against the Japanese currency, the dollar edged up to 105.14 yen from 105.08.
The market was still reacting to unusual remarks by the Fed chief Tuesday on currencies as a signal the US central bank would not be in a hurry to cut interest rates again as such a move would be likely to weigh on the dollar.
"Clearly, the Fed could be wrong and the data could deteriorate afresh causing the Fed to ease again but the current rhetoric feels consistent with a view that rates have bottomed (out)," said Calyon analyst Daragh Maher.
"Bernanke's emphasis of the unwelcome inflationary side-effect of a weak dollar suggests the Fed is less worried about growth and increasingly nervous about inflation," Maher said.
The Fed next meets on June 24-25 when it is expected to keep rates on hold, having already slashed borrowing costs to 2.00 percent from 5.25 percent.
Bernanke's unusual attention to currency issues sent shockwaves through currency markets as a possible turning point for the dollar.
Stephen Malyon at Scotia Capital said however he remained unconvinced.
"Despite their historical significance, it remains to be seen just how much impact Bernanke's comments have on the currency market in the near term. There is still a big step between verbal and outright market intervention," he said.
"Our take is that the Fed has found itself increasingly boxed in in terms of policy flexibility due to the stagflationary environment that is developing in the United States, and that it views dollar weakness as a growing risk to price stability and inflation psychology."
Meanwhile US economic data was generally better than expected on Wednesday.
An index of service sector or non-manufacturing activity by the Institute of Supply Management eased to 51.7 in May from 52.0 in April, but remained in the growth mode above 50 percent, suggesting a resilient economy.
A government report meanwhile revised up to 2.6 percent the gains in first-quarter US labor productivity from an earlier estimate of 2.2 percent.
Analysts said the reports were positive.
"Overall, we would take solace from the fact that (US) economic conditions no longer appear to be deteriorating," said Paul Ashworth at Capital Economics.
Dealers said the market is looking forward anxiously to the official US employment report due Friday for its next key lead -- assuming the ECB and a Bank of England meeting pass without surprise.
The European Central Bank and the BoE meet on Thursday, when they are expected to leave interest rates unchanged at 4.0 percent and 5.0 percent respectively.
In late New York trade, the dollar stood at 1.01414 Swiss francs after 1.0416 Tuesday.
The pound was at 1.9548 dollars from 1.9632.
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