The dollar steadied on Tuesday as investors awaited U.S. inflation data that is likely to set interest rate expectations, while the yen remained near a two-week low, raising concerns about monetary authorities' intervention.
Investors now expect a 42 basis point cut in US interest rates over the year, compared to expectations at the beginning of the year of a 150 basis point cut, according to Reuters.
Markets are pointing to a 60% chance of a rate cut in September, compared to 75% a month ago.
Traders are looking ahead to the consumer price index (CPI) on Wednesday, which is expected to show inflation rising 0.3% month-on-month in April, down from 0.4% the previous month, according to a Reuters poll.
Later on Tuesday, the US Producer Price Index data will be released, which markets are awaiting for signs of whether inflation is on its way to what the Federal Reserve is targeting.
The euro fell slightly to $1.0786 in today's session, but it has risen about 1% so far this month.
The pound is trading at $1.2559, up about 0.5% so far in May.
The dollar index, which measures the performance of the US currency against a basket of six major currencies, recorded 105.27 points in the latest trading.
The index fell about 1% during the current month.
Tensions rose again as the Japanese yen approached levels that saw potential interventions by the authorities.
The yen was trading at 156.41 per dollar after touching a two-week low of 156.50 per dollar earlier in the session.
In terms of other currencies, the Australian dollar fell 0.11% to $0.6601, while the New Zealand dollar was steady at $0.6016.
