The dollar traded broadly lower on Tuesday after fresh data revealed a disappointing snapshot of the US housing market
Sales of new US home fell in July for the third consecutive month, the Commerce Department said. The report revealed a 1% drop in July to a seasonally adjusted annual rate of 298,000.
Trading was lighter than usual, with many avoiding any big moves, ahead of a key speech by Federal Reserve Chairman Ben Bernanke on Friday. It is widely expected that Bernanke could indicate another round of stimulus measures to kindle US economic growth, a move that could ultimately pressure the dollar.
The dollar index, which measures the US currency against a basket of six rivals, dropped to 73.895 from 74.063 the previous session.
Better than expected Chinese PMI data and Eurozone PMI figures spurred some risk appetite on Tuesday and sent the euro to its highest level against the dollar in a week. The single currency also advanced against the yen and Swiss franc as investors snapped up higher yielding currencies.
The dollar dropped to 76.64 Japanese yen from 76.72 yen despite warnings from Japanese officials that intervention measures could be taken to weaken the yen.
Finance Minister Yoshihiko Noda said the government is keeping a close eye on speculative moves in the currency market and would take action if the yen continues to rally.
Sterling firmed against the dollar and reduced losses against the euro but lacked any clear direction on Tuesday as traders continue to monitor the UK's economic outlook.