ECB President Mario Draghi, speaking to university students in Lisbon, said super low rates create jobs, foster growth and benefit borrowers, ultimately easing inequality. The euro fell earlier this month after the ECB said policymakers had not discussed scaling back its massive bond-buying program.
The euro, which hit a more than one-week high against the U.S. dollar of $1.1219
"Draghi pouring water on expectations of reducing monetary stimulus, that saw the euro then start to weaken," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.
Fed Chair Yellen is set to deliver a speech in Europe on Tuesday. Analysts said traders were expecting Yellen to maintain a positive outlook on the U.S. economy despite a recent batch of weak U.S. economic data, thereby supporting the Fed's forecast of raising interest rates once more this year and three times next year.
Those expectations helped the dollar gain against a basket of major currencies. The dollar hit a one-month high against the yen of 111.93 yen
The risk that Yellen could tweak her outlook in a more dovish direction kept traders on tenterhooks and limited the dollar's gains.
Worries have grown that an acceleration in economic growth in the second quarter may not be as robust as expected. Recent data on retail sales, manufacturing production and inflation have given pause and housing data has been mixed.
"We’ll know more from Yellen tomorrow," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Group Ltd in New York. "Traders are still split on what the Fed is going to do."
The euro was last down 0.1 percent against the dollar at $1.1179. The dollar fell against emerging market currencies, however, partly on a reach for higher-yielding alternatives to the greenback amid low volatility. The dollar was last down 1.3 percent against the Brazilian real at 3.2998 reais
(Additional reporting by Patrick Graham in London; Editing by Frances Kerry and Diane Craft)
By Sam Forgione
