The U.S. dollar weakened against most of its peers on Tuesday as risk sentiment in the market improved amid hopes of further economic stimulus.
Traders kept an eye on remarks from Treasury Secretary nominee Janet Yellen during her confirmation hearing before the Senate Finance Committee.
In prepared remarks, Yellen called for additional stimulus to address the impact of the ongoing coronavirus pandemic, arguing the government needs to "act big."
Yellen acknowledged the mounting national debt facing the incoming administration but claimed the benefits of another relief package will far outweigh the costs.
Yellen said now was the time to "act big" without worrying about national debt. "Without further action, we risk a longer, more painful recession now and longer term scarring of the economy later," she said.
The dollar index slid to 90.40 in the European session, and despite recovering to 90.50, still trails its previous close by about 0.3%.
Against the Euro, the dollar weakened to $1.2128, going down by more than 0.4%. The euro area current account surplus fell to EUR 25 billion in November from EUR 26 billion in October, the European Central Bank reported. The surplus totaled EUR 24 billion in the same period last year.
Survey data from the ZEW - Leibniz Centre for European Economic Research showed the Zew Indicator of Economic Sentiment in Germany climbed 6.8 points to 61.8 in January. The reading was above the expected level of 60.0. The current situation index climbed slightly to -66.4 from -66.5 in December. The expected level was -68.5.
The Pound Sterling was stronger, fetching $1.3634 a dollar, about 0.36% more than previous close.
The Japanese Yen weakened to 103.89 a dollar, losing nearly 0.2%. Industrial output dropped 0.5% month-on-month, in contrast to October's 4% increase and the flash estimate of nil growth. This was the first fall in six months. On a yearly basis, industrial production decreased 3.9 percent, data showed.
The Aussie was stronger with the AUD-USD pair at 0.7679, gaining from 0.7681.
The Swiss franc firmed up against the dollar to 0.8886 from 0.8908. Switzerland's producer and import prices decreased 2.3% year-on-year in December, data from the Federal Statistical Office showed on Tuesday. The producer price index decreased 1.2% annually in December and import prices decreased 4.5%. On a monthly basis, producer and import prices rose 0.5% in December.
The Loonie was stronger at C$1.2732, firming up from C$1.2757 a dollar.