[IFX Darika]

The dollar briefly touched a fresh 9-month high versus the euro and kept most of its dramatic recent gains against the sterling Tuesday morning in New York, with markets waiting for further clues about the condition of the US economy.

A string of lackluster economic data released over the past few weeks has fueled concerns that the robust growth seen in the fourth quarter of 2009 was a temporary result of massive government spending.

However, the economies in Europe remain even more distressed, making the dollar an attractive alternative to the euro and sterling.

An overnight surge brought the dollar to 1.3434 versus the euro, its highest level since last May. However, the buck quickly turned back to trade at 1.3550.

Tuesday, a flash report from the Eurostat showed that consumer price inflation in the euro area stood at 0.9% in February, down from 1% in January.

The dollar consolidated its gains against the sterling, holding near 1.4950. Yesterday, the dollar skyrocketed to 1.4790 amid concerns about the British economy.

U.K. construction activity contracted in February, a survey conducted by the Markit Economics showed Tuesday. The seasonally adjusted CIPS/Markit Construction Purchasing Managers' Index fell slightly to 48.5 in February from 48.6 in January.

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply said, "While the UK economy slowly pulls into recovery mode, the construction sector has now been confined in recession territory for two years and is still very fragile."

Elsewhere, Japanese Finance Minister Naoto Kan said the government will not demand the Bank of Japan to purchase bonds directly from the government.

The dollar saw little movement against the yen, staying near 89 for a fourth day.

Conversely, the dollar remained under heavy pressure against its Canadian counterpart, hitting 7-week low of C$1.0340.

The Bank of Canada will make its interest rate announcement this morning. Economists expect the target for the key overnight rate to remain unchanged at 0.25 per cent.

Individual automakers are scheduled to release their monthly U.S. sales results for February. The data will reveal the unit sales of domestically produced cars and light duty trucks, including sports utility vehicles and mini-vans, during the month.