The dollar edged slightly lower after solid overnight gains as both European and Japanese officials expressed concern about the recent sharp rises in their currencies against the US unit.

While intervention to prop up the dollar is seen as unlikely, officials are increasing the pressure on the US administration to reiterate its strong dollar policy following the recent steep falls against a range of major currencies.

'Both Japan and Europe are becoming increasingly concerned by recent developments in the currency markets and are notably making very deliberate reference to wording from past G7 statements,' said Simon Derrick at the Bank of New York (nyse: BK - news - people ) Mellon.

Speaking late yesterday, euro group president Jean-Claude Juncker said current exchange rates do not reflect economic fundamentals and excessive volatility is not desirable for growth.

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European Central Bank governing council member Guy Quaden also called on the US to reiterate it favours a strong dollar.

But attention will now turn to Thursday's interest rate decision and accompanying press conference by ECB president Jean-Claude Trichet, who has repeatedly focused on the risks of rising inflation.

'Any mention of euro strength by ECB President Trichet in the press conference (after the rate decision) is likely to weigh heavily on euro/dollar and euro/sterling,' said Steve Pearson (nyse: PSO - news - people ) at HBOS.

Meanwhile, the yen came off highs across the board after Japanese officials warned of the strong yen's impact on consumption and earnings at companies.

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