The dollar rose on Tuesday after a top Federal Reserve official said the central bank's asset purchase plan should be curtailed, but analysts said the dollar would remain under pressure on views the Fed would lag other monetary authorities in tightening policy.

The dollar was up sharply versus the yen, which retreated to post-intervention lows, and was trading little changed against the euro after initially rising on comments by St. Louis Federal Reserve bank President James Bullard.

Bullard told an audience in Prague the U.S. economy was strong enough to curtail the Fed's $600 billion bond-buying program by $100 billion. more

The euro eased on Monday and could fall toward mid-March lows after a state election loss by Germany's ruling party raised doubts about the tackling of Europe's debt crisis, while the dollar was aided by hawkish comments from Federal Reserve officials.

 The higher-yielding Australian dollar AUD=D4, hit a 29-year peak of $1.0307, breaking past option barriers at $1.03. The recent yen-weakening intervention and stronger risk appetite were factors underpinning the Aussie's rise, traders said.

 For the euro, the failure to break through option barriers around $1.4250 last week saw some paring in speculative long positions, although support around $1.4015/35 appeared to be holding for now with bids by Asian central banks around $1.4030 were also cited.

The dollar rose against the euro on Tuesday on fear some euro zone states won't be able to withstand higher interest rates, though further gains will likely require the Federal Reserve to hint at tighter policy.

 Tough inflation talk from European Central Bank President Jean-Claude Trichet last week pushed the euro above $1.40 on expectations of an increase in euro zone interest rates by as early as next month.

 Recent credit downgrades for Greece and Spain reminded investors higher borrowing costs and a stronger currency would make it more difficult for debt-burdened countries to boost growth.

 "The problem with the interest rate driven trade and Trichet's hawkish comments is that you have to see the other issues behind it," said John McCarthy, director of foreign exchange at ING Capital Markets in New York. "Higher rates will be devastating on the peripheral countries." more