Bernanke, in testimony to Congress, said he was seeing signs that some of the uncertainty dampening US business investment, including European banking woes, might be waning.

He cautioned that it was too soon to say whether the US would remain unscathed, but said the Fed would do everything it can to prevent the European debt crisis from damaging the US economy.

“Bernanke is a little more bullish on the economy than expected,” said John Doyle, a currency strategist with Tempus Consulting in Washington, D.C. “That sent the dollar lower and the euro higher, but I don’t know how long it will last.” 

The euro advanced briefly against the dollar before trading near flat at $1.3157.

The dollar also slipped against a basket of major currencies, with the dollar index off 0.01 percent.

US shares mostly firmed after new claims for US unemployment benefits fell more than expected last week, but a reluctance to make big bets before the government’s release on Friday of its monthly jobs report limited gains.

“The jobless claims continue the trend of decent news, though there have also been other indications of a general loss of momentum,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio. “That suggests we’re in the right ballpark with estimates for the jobs report, but also that we aren’t likely to see a huge upside surprise.”

The US non-farm payrolls data for January is expected to show a rise of 150,000 jobs, according to analysts in a Reuters survey. That’s below the 200,000 jobs added in December, as some holiday workers were laid off.

Caution around the euro zone sovereign debt crisis kept markets on edge. 

Luxembourg’s Jean-Claude Juncker, who heads the euro zone’s group of finance ministers, said the outcome of this week’s European Union summit was “largely insufficient” when it came to tackling the sovereign debt crisis and described Greek debt talks as “ultra-difficult.”

Athens is scrambling to wrap up talks on a 130-billion-euro rescue plan and a bond swap deal before big bond redemptions come due in March. 

Adding to the mix, German Finance Minister Wolfgang Schaeuble said Greece’s public sector creditors have already done enough to help alleviate the country’s debt crisis and the onus to act rests with the private sector.  

“There’s growing recognition that the Greek debt deal will get done,” said Karl Schamotta, senior markets strategist with Western Union Business Solutions. “The question is when and in what form, versus the really binary concern prior to this.”

The Dow Jones industrial average dropped 4.35 points, or 0.03 percent, to 12,712.11. The Standard & Poor’s 500 Index gained 2.05 points, or 0.15 percent, to 1,326.14. The Nasdaq Composite Index gained 13.46 points, or 0.47 percent, to 2,861.73.

The FTSEurofirst 300 index of top European shares hit a six-month closing high. The index provisionally closed up 0.2 percent at 1,059.15 points.

Miner Xstrata and commodities trader Glencore led gains after it was confirmed that they were in merger talks to create a combined group worth more than 50 billion pounds. Xstrata jumped 9.9 percent, and Glencore climbed 6.9 percent.

The MSCI world equity index gained 0.27 percent to 321.66, having risen over 7 percent for the year to date.

Spain and France saw their borrowing costs fall at debt auctions on Thursday, but demand for Spanish bonds was weaker than what had been seen in the prior two months, analysts said, which could be a signal of waning demand for euro zone government debt.

Spain sold 4.56 billion euros of three-, four- and five-year bonds while France sold nearly 8.0 billion euros of debt, including a new 10-year bond with lower average yields compared with the previous sales.

“A reasonable set of results but certainly not the humdinger of an outcome as seen at the last two sets of auctions,” said Richard McGuire, rate strategist at Rabobank. 

Brent crude oil traded near flat on Thursday at $111.56 per barrel, as a large build-up of oil stocks in top consumer the US countered upbeat economic data globally. 

US crude fell to $96.00 per barrel on inventory data and expectations of plentiful flows into a key US refining hub.