The safe-haven dollar clawed back some of its overnight losses on Tuesday and the yen strengthened as US stock futures fell after a profit warning from Snapchat, souring the mood after Wall Street's strong start to the week.
The dollar index, which measures the currency against six major peers, increased by 0.1% to 102.24 after Monday's 0.85% tumble took it further from the nearly two-decade peak above 105 marked mid-month.
The dollar fell 0.18% against the yen, to 127.695 yen, down 0.18% against the pre-eminent haven currency.
The euro fell by 0.21% to $1.0672, but barely dipped off a 1.17% surge from Monday, when European Central Bank President Christine Lagarde said policymakers were likely to lift the euro area deposit rate out of negative territory by the end of September.
The risk-sensitive Aussie dollar dropped by 0.46% to $0.70775, and sterling fell 0.22% to $1.2558.
U.S. stock futures indicated a 0.81% slide for the S&P 500 and 1.41% fall for the Nasdaq at the restart, tarnishing a strong session on Monday that saw the indexes climb 1.86% and 1.68% respectively. N Traders pointed out an after-the- bell profit warning from Snapchat owner Snap that saw the stock fall 28% in extended trading.
The dollar is falling alongside a decline in Treasury yields from multi-year peaks, with aggressive easing by the Federal Reserve already priced in.
Positive signs for the global economy such as Shanghai's expected emergence from weeks of crippling COVID 19 lockdowns and U.S. President Joe Biden's comments this week about a possible easing of the trade war with China have lifted sentiment at the dollar's expense.
The release of global manufacturing PMIs over the course of Tuesday will be a key focus for currency traders.
If the data is good, that should continue the trend of an easing dollar, as the global economy recovers from various shocks, said Joseph Capurso, a strategist at Commonwealth Bank of Australia.
The U.S. dollar is carving out a peak and the commodity currencies like the Aussie are carving out a bottom, but it's going to be bumpy.