By Saqib Iqbal Ahmed
NEW YORK (Reuters) - The greenback held gains against a basket of currencies on Thursday as investors took stock of former FBI Director James Comey's testimony to the U.S. Senate, while the euro weakened after the European Central Bank kept interest rates on hold.
Comey on Thursday accused President Donald Trump of firing him to try to undermine the bureau's investigation into possible collusion between his 2016 presidential campaign team and Russia, but did not say whether he thought the president sought to obstruct justice.
The dollar index (DXY), which tracks the greenback against six major rivals, was up 0.27 percent at 97.01. Against the yen, the greenback was up 0.26 percent to 110.07 yen, after rising to a two-day high of 110.38 yen.
"So far we haven’t had any major surprises or any kind of bombshells released," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
"The dollar-yen ran up a little bit as the testimony got underway, suggesting a little bit of a relief on the fact that we are not likely to get a smoking gun from James Comey that we did not already know."
The euro fell after the ECB cut its forecasts for inflation and said policymakers had not discussed scaling back its massive bond-buying program.
The euro, which weakened on Wednesday on reports that the ECB would cut its inflation forecasts, was down 0.4 percent to $1.121, after dipping to $1.1196, its lowest since May 31.
"Even though it was well telegraphed over the last 24 hours, the future expectations on inflation came in a bit lower than the market had been anticipating," said Dean Popplewell, chief currency strategist at Oanda in Toronto.
"That sort of weighed on the euro."
The euro has risen against the dollar in the past five months, partly due to the greenback's weakness, but also on the view that rising inflation would prompt the ECB to raise interest rates in early 2018.
Meanwhile, sterling fell against the dollar while market bets on how volatile the currency will be over the next 24 hours touched their highest in a year, as Britain voted in a national election that some polls have suggested is too close to call.
Sterling hit a two-week high of $1.2936 earlier in the session after polling organizations' last surveys, but weakened later in the day to trade down 0.18 percent at $1.2936.