Federal Reserve Chairman Alan Greenspan said in his Congressional testimony on Wednesday that the US economy continues to rebound and reiterated that the Fed funds rate is still below neutral even after the recent hikes. The Fed’s stance on the rate gave a short-term boost to the dollar.

"People are very confused which way to push euro/dollar now," said Lee Ferridge, senior proprietary trader at Rabobank. "The dollar is caught between two opposing camps, structural concerns and cyclical economic strength."

The market was alerted by the fact that Greenspan did not use the often-mentioned word "measured" with reference to the projected rate hikes, suggesting that the increases can speed up in the near future.

The Fed boss said the following: "The cumulative removal of policy accommodation to date has significantly raised measures of the real federal funds rate, but by most measures, it remains fairly low."

The neutral range forecast by economists hovers between 3% and 5%.

On the other hand, Fed chairman seems to see the inflation to be tame at the moment. In his speech he named inflation expectations to be "well anchored."

"Despite the combination of somewhat slower growth of productivity in recent quarters, higher energy prices, and a decline in the exchange rate for the dollar, core measures of consumer prices have registered only modest increases," Greenspan said.