The dollar dropped against the euro and the yen as Fed officials this week did not comment on aggravating inflationary pressures. Federal Reserve Chairman Alan Greenspan delivered two speeches this week without mentioning inflation expectations.

The euro rose to $1.2923 from $1.2882 in New York late Wednesday.

``We think the Fed will stay hawkish but unless there’s a major inflation surprise, it will be a case of 25 basis point increases at every meeting rather than 50,’’ said Marcus Hettinger, a currency strategist at Credit Suisse First Boston in Zurich. A basis point is 0.01 percentage point. ``Dollar strength has gone a little bit overboard.’’
The euro strength will depend on the possible comments from ECB President Jean-Claude Trichet who will hold a press conference in Frankfurt immediately after the ECB’s announcement on rate moves. The European Central Bank is projected to keep the rate at 2% today.