Dollar steadies as second dose of Greenspan awaited

The dollar held at four-and-a-half month highs against the euro and was steady versus the yen on Wednesday after testimony by the Federal Reserve chief signalled a rise in US interest rates was on the horizon.
The dollar appeared to lose its way in Tokyo trade after gaining against major rivals overnight after Fed Chairman Alan Greenspan said the threat of deflation was over in the United States.
"The market doesn't seem to have a clear sense of direction at this point," said Junya Tanase, forex strategist at J.P. Morgan Chase.
The market was fixated on the second round of testimony by Greenspan slated for 1400 GMT, although many analysts expected his remarks would simply be a detailed confirmation of Tuesday's comments and would likely have limited impact.
Dollar/yen trading was erratic early on in Tokyo, with the US currency touching a high of 109.15 yen on Greenspan's remarks.
The dollar was at 108.85 yen little changed from late New York trade but up from the day's low around 108.60 yen.
It fetched $1.1840 per euro, a tad up from the late US mark around 1.1855. The euro was at 128.90 yen, down from 129.12.
The single currency was surprisingly resilient against the dollar despite being cornered by US interest rate speculation as well as disappointing economic data out of Germany, the euro zone's biggest economy.
The German ZEW research institute's economic expectations indicator dropped to 49.7 in April against a consensus forecast of a rise to 58.0 from March's 57.6.
Coupled with Greenspan's testimony, the weaker-than-expected figures drove the euro down to levels not seen since November 26 in overnight trading.
"Given the difference in economic fundamentals, the euro is looking more vulnerable against the dollar than the yen right now, and I expect it to continue on a gentle downtrend," said Shinichi Takasaka, manager of forex and financial products trading at Mitsubishi Trust and Banking Corporation.
Analysts said dollar buying would continue in the near term as the market contemplated the timing of a US interest rate hike, but the currency's downtrend was seen resuming eventually.