The dollar hovered around a lower watermark from its earlier highs against the euro, but was bolstered by further news from the Federal Reserve.

At midday the dollar stood at 1.1654 to the euro and was at 1.7171 against the pound.

Ben Bernanke, currently a White House adviser, has been nominated for the top job at the Fed, after being named by President Bush as the main to succeed Alan Greenspan as chairman.

Mr Bernanake, who will follow Greenspan into the job after 18 years in the hot seat, bolstered the chances of sustained interest rate rises in the US with comments today.

Speaking at his Senate confirmation he insisted that tackling inflation would be top of his agenda.

He pledged to "make continuity with the policies and policy strategies of the Greenspan Fed a top priority".

The comments prompted analysts to predict further rises on the back of the 12 consecutive increases in the base rate since last year.