But the single currency climbed 0.3 percent on Wednesday to $1.0435, boosted by data showing euro zone prices rose faster than expected in December and surveys suggesting business growth reached its highest in more than five years. That left it almost a cent above the trough hit on Tuesday, but some way off a three-week peak of $1.07 touched during a bout of low liquidity last week and over 6 percent lower compared with two months ago.
"The data coming from Europe is supportive for the euro, but only at the margins," said MUFG currency economist Lee Hardman, in London. "Ultimately, the feed-through into the euro is dampened by the fact that the ECB (European Central Bank) has already announced an extension of its QE (quantitative easing) programme into the end of this year. So it's unlikely that the data is going to be strong enough in the near term to prompt a reassessment."
The dollar has climbed almost 6 percent since Donald Trump was elected as US president eight weeks ago, on expectations that his new administration will introduce reflationary measures backed by large fiscal spending, prompting the Federal Reserve to follow through with a series of interest rate hikes. But with investors already pricing in two to three rate increases this year, analysts reckon they will want to see more evidence that growth and inflation are rising and that the pace of rate hikes will accelerate before putting on more bets on the dollar.
HSBC, nevertheless, changed its forecasts late on Tuesday to show the euro falling to $1.01 in the first quarter, down from $1.08 previously, though they expect the dollar will then slip back for the rest of the year, never reaching parity. The dollar index - which measures the greenback against a basket of six major rivals - fell 0.3 percent to 102.94, having hit a peak of 103.82 on Tuesday. "Yes, we've had some good US data, but we've also had stronger (European) data," said Rabobank currency strategist Jane Foley, in London.
"Are investors really prepared to push above those 14-year highs to make that extra move down to parity? I suspect the market may need a bit more incentive to do that." The dollar was seen facing potential turbulence before Friday's highly anticipated US non-farm payrolls report.