The dollar edged up from a five-week low on Tuesday as traders weighed the path to a September interest rate cut, after comments from Federal Reserve Chairman Jerome Powell and the increased chances of former President Donald Trump being re-elected.
The Japanese yen fell in Asian trading after hitting a one-month high of 157.165 to the dollar on Monday, raising concerns about further intervention by Tokyo.
Powell said the three U.S. inflation data in the second quarter somewhat bolstered confidence that the pace of price increases was returning to the Fed's target in a sustainable manner.
The comments, likely to be Powell's last until his press conference after the Fed's July 30-31 meeting, have changed expectations for a rate cut.
According to the CME FedWatch tool, markets now expect 68 basis points of rate cuts this year, starting in September.
Price movements
The dollar index, which measures the greenback's performance against a basket of six major currencies, was at 104.3, not far from a one-month low of 104 touched on Monday.
The euro was at $1.0893, just below a four-month high touched on Monday after erasing all losses from the past few weeks when it was pressured by political uncertainty in France.
Market focus shifts to the European Central Bank's monetary policy meeting on Thursday, where it is expected to keep interest rates unchanged, but attention will be on comments from ECB President Christine Lagarde for clues on the timing of the next rate cut.
Markets are expecting 48 basis points of cuts this year.
Japanese authorities continued their warnings about the yen's decline, as Chief Cabinet Secretary Yoshimasa Hayashi said that Tokyo is ready to take all possible measures in the foreign exchange market.
Markets believe Tokyo intervened in the market in another attempt to lift the Japanese currency last week after a weaker-than-expected U.S. inflation report.
Bank of Japan data shows authorities may have spent as much as 3.57 trillion yen to support the ailing currency.
Markets will be looking to fresh financial market data to see if Tokyo also intervenes on Friday.
The yen was last down 0.4 percent at 158.64 per dollar and down against other currencies.
On the cryptocurrency front, Bitcoin rose 1 percent to trade near $65,000, near its highest levels in a month.
Ether rose 1 percent to $3,466, hitting a two-week high.
Sterling was little changed at $1.29625, still below a one-year high hit on Monday, as traders awaited UK inflation data on Wednesday for further clues on interest rate policy.
The Australian dollar fell 0.27 percent to $0.6741, moving away from a six-month high touched last week.
The New Zealand dollar fell 0.17 percent to $0.6064, its lowest level in two weeks ahead of inflation data due on Wednesday.
