The U.S. dollar gained against major peers on Tuesday after Federal Reserve Chair Jerome Powell pushed back overnight against bets on more supersized interest rate cuts.
The euro traded not far from Monday's one-week low following a drop in German inflation to the lowest since early 2021, boosting speculation about another rate reduction this month.
The yen steadied close to the middle of its range against the dollar over the past month, after a volatile two days as traders sized up Japan's incoming prime minister and his cabinet.
Australia's dollar caught its breath following its push to the highest since February of last year on Monday, buoyed by stimulus in the country's top trading partner, China.
The Fed's Powell adopted a more hawkish tone in a speech at a conference in Tennessee, saying the U.S. central bank would likely stick with quarter-percentage-point interest rate cuts moving forward. "This is not a committee that feels like it is in a hurry to cut rates quickly," he said.
Traders remain certain that the Fed will cut again at the next policy setting meeting in November, but slashed expectations for a 50 basis-point reduction to 35.4% from 53.3% a day earlier, according to CME Group's FedWatch Tool.
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