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NEW YORK (TheStreet) -- The euro weighed on the dollar Thursday as European officials stood by their hawkish rhetoric on inflation control and the greenback went on the defensive amid turmoil in North Africa and the Middle East.

The euro was rising 0.4% at $1.3804 in late afternoon trading.

"The hawkish comments from the ECB (European Central Bank) over the last week or so has helped the euro continue in its direction to the upside," said FXDD Chief Currency Analyst Greg Michalowski. However, Michalowski noted that the currency was becoming overbought from a technical standpoint.

Michalowski said the European policymakers remain unfazed by economic woes faced by European Union member nations such as Portugal.

"The ECB has gradually unwound many of their extraordinary liquidity facilities," Brown Brothers Harriman Global Head of Currency Strategy Marc Chandler noted in a daily report. "It is expected to signal intentions to return to only weekly and monthly liquidity provisions next week."

The greenback was on its heels as oil prices surpassed the psychologically significant $100 a barrel level for the second day in a row, pumping investor money into safe-haven currencies like the Swiss franc. The dollar was falling 0.8% to CHF 0.9258.

Oil prices were volatile again on Thursday as sociopolitical upheaval in oil-crucial country Libya continued. However, light sweet crude oil for April delivery settled 82 cents, or 0.8% lower, to $97.28 after hitting an intraday high of $103.41; the markets were finding some consolation in the assertion by Saudi Arabian officials that their country would boost oil production to help replace supplies lost in Libya.

UBS strategist Chris Walker, in an investor note, suggested borrowing the Swiss franc and Japanese yen -- currencies with lower interest rates -- to fund buying of the euro, Norwegian krone, Swedish krona and Canadian dollar as interest rates begin to rise in their respective countries.

Meanwhile, currency markets search for more clarity on monetary policy in the United States. In the minutes of the Federal Open Market Committee's January meeting, the committee said it would maintain the federal funds target rate at 0 to 1/4 percent. However, speaking at a Women in Housing and Finance luncheon in Washington D.C. on Wednesday, Kansas City Federal Reserve Bank President Thomas Hoenig said he was concerned that continually low U.S. interest rates would invite market speculation and resurgence of trouble in the financial sector.

On Thursday, while addressing a Chamber of Commerce breakfast meeting at Western Kentucky University, St. Louis Federal Reserve President James Bullard suggested it may be time for the Fed to begin reducing its $600 billion treasury-buying program as the country continues to recover. At the same time, he spoke with some caution, given the U.S.'s risk exposure to ongoing debt problems in Europe and turmoil in the Middle East and North Africa.

"The Fed has to has be little bit more specific about what they're going to be doing and just acknowledge that down the road they may have to take back some of this liquidity," FXDD's Michalowski said.

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ended 0.4% higher at $27.74 Thursday, while

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-- Written by Andrea Tse in New York.

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