NEW YORK: The dollar climbed against the euro o n Tuesday, snapping two straight sessions of losses as US data tempered concerns of more stimulus from the Federal Reserve.
The greenback's rally came a day after comments from US Federal Reserve Chairman Ben Bernanke raised expectations that the Fed could yet embark on a third round of quantitative easing to stimulate the economy further.
On Monday, Bernanke said "further significant improvements in the unemployment rate will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies." He made those comments to the National Association for Business Economics.
Until markets have more clarity on the Fed's plans, though, trading could remain constrained, analysts said.
"From our perspective, people are misinterpreting the Bernanke speech," said Mark McCormick, a G10 currency strategist with Brown Brothers Harriman in New York.
"I think people have taken it as sign of quantitative easing coming down the line, but I think that exaggerates the key takeaway," he added.
The euro slid 0.2 percent to $1.3329 in late afternoon New York trade o n Tuesday.
A US report showed home prices were unchanged in January from December, the first time since July the seasonally adjusted S&P/Case-Shiller 20-city index has not declined and a sign that the battered housing market is slowly stabilizing.
A report from The Conference Board industry group showed the index of consumer attitudes eased to 70.2 from an upwardly revised 71.6 the previous month, roughly in line with economists' expectations for a 70.3 reading.
The details of the report were mixed as consumers' expectations fell, but their assessment of their current situation rose to the highest level since September 2008.
"The economy is doing a lot better than many people thought, and the market is going to run with that, but the Fed will not stand around while US yields back up significantly," said Neil Mellor, currency strategist at Bank of New York Mellon in London.
"There will be a cat-and-mouse game between the market and Bernanke. I think the dollar will be in a range for some time."
The euro zone's sovereign debt crisis could still weigh on the single currency, as well.
While Germany signaled for the first time on Monday its willingness to increase the resources available for tackling the euro-zone debt crisis, several key events remain this week.
Those include a meeting of euro-zone finance ministers in Copenhagen on Friday and Saturday and Spain's budget presentation on Friday.
The meeting of finance ministers "could result in some near- term volatility," said Omer Esiner, chief market analyst with Commonwealth Foreign Exchange in Washington, D.C. "It's hard to push the euro up further from these levels without some catalyst."
YEN STEADIES AFTER DROP
Traders and analysts said moves in US Treasuries would be key for the dollar. If demand for Treasuries gained steam and bond yields fell in the wake of Bernanke's comments, the dollar could face more pressure.
The greenback was up 0.4 percent against the yen at 83.12 yen, though below a recent 11-month high. Against Japan's yen, the single currency rose 0.1 percent to 110.76 yen .
The Japanese currency was seen as vulnerable to more selling, and has been under heavy pressure since Japan announced monetary easing measures last month.
With the fiscal year ending on March 31, which is Saturday, expected repatriation flows have done little to support the yen so far, said Joe Manimbo, a market analyst with Western Union Business Solutions in Washington, D.C.
"That suggests next week the yen could come under pressure, since it didn't benefit from expected month- and year-end flows," he added.
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