The dollar rose on Tuesday as the euro and sterling weakened following attacks in Brussels that left at least 34 dead, weighing on investor risk sentiment and bolstering the view that Britain was more likely to vote to exit the European Union. Sterling fell by more than 1 percent to its lowest level in a week. Analysts said the attacks on Brussels airport and a rush-hour metro train were likely to strengthen the case for those pushing for Britain to leave the EU in a June referendum.
"The attack in Brussels, on the back of terrorist attacks in Turkey over the weekend ... is bad news for the UK, because it plays into the hands of those who want to leave, thinking that somehow if they leave they're safe," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
"Brussels makes people think about their borders and immigration." European shares moved lower, dragged down by airline and travel stocks, souring overall sentiment towards high-yielding and riskier assets. The yen, a favoured safe haven in times of market volatility and uncertainty, also rose, touching a 12-day high against the euro. The yen was up almost 1 percent at one point and hit a session high of 111.38 yen per dollar.
The dollar was last down 0.25 percent to 111.65 yen. The Swiss franc climbed to a more than two-week high of 1.08765 franc per euro. Against the dollar, the franc was flat at 0.9704 franc. Against the dollar, the euro was lower at $1.1220, furthering its recoil from Thursday's one-month high of $1.1342, with the Brussels blasts overshadowing a German business sentiment survey and euro zone purchasing managers' surveys. The euro's losses compounded those in the pound, helping the dollar index rise 0.2 percent to 95.485 and further extending its rebound from a five-month trough on Friday.
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