The dollar eased on Tuesday as global equity markets showed some signs of stability after their recent rout. Investors remained cautious ahead of U.S. inflation data set to be released on Wednesday.
Many market players are not convinced the worst is over, with U.S. bond yields stuck at elevated levels ahead of the U.S. consumer price data that could revive worries about inflation.
The dollar index against a basket of six major currencies extended modest losses suffered overnight and dropped 0.25 percent to 89.987. The index pulled back from a two-week high of 90.567 scaled late last week, when it had benefited as a safe haven in the aftermath of the global market selloff.
The greenback was down 0.3 percent to 108.285 yen, pressured by the languishing Nikkei.
The euro added 0.15 percent to $1.2310, bouncing off the previous week's trough of $1.2206.
Buying the euro was one of the popular trades earlier this year on the perspective that the European Central Bank will scale back its stimulus later this year on the back of a strong recovery in the euro zone economy.
Although many market players remain bullish on the euro in the long term, the currency lacks new catalysts for further gains amid headwinds from uncertainties ahead of Italy's election in early March.
The Australian dollar was steady at $0.7866 after rising about 0.6 percent overnight on the back of higher commodity prices and improvement in broader risk sentiment.
|See also: Current support and resistance levels|