The euro got a brief push higher from strong German investor confidence data on Tuesday but quickly gave up gains as markets remained uncertain about Europe's economic prospects. However, the euro traded up from the previous session's seven-week low against the yen as investors took profits on recent stock-related buying of Japan's currency.
Germany's ZEW expectations index rose much more strongly than expected this month, hitting a 17-month high of 50.0, compared with July's 37.0 and consensus forecasts of 38.5.
"The ZEW was a bit of a good thing. It's a good signal for the eurozone economy but it didn't impact the forex market much and the euro is back to trading sideways," said Peter Fontaine, currency strategist at KBC in Brussels.
The euro rose as high as $1.2255, before paring gains to trade at $1.2243 at 1130 GMT, slightly up on the day. It was 0.4 percent stronger at 134.75 yen, compared with 133.49 yen on Monday, its lowest level since July 7.
"The ZEW tends to react to a pick-up in equities, that's why there was a rise," said Neil Parker, market strategist at RBS Financial Markets. "But oil prices and the euro rose and that's not good for the German economy. The Ifo index might come strong but that's future expectations rather than current conditions. You often see these future expectations disappoint. That's why the euro is coming off a bit."
The dollar was also 0.2 percent higher at 109.95 yen.
Traders in Tokyo said the dollar's gains were due largely to investors squaring positions on the US currency's recent losses, while a lack of key market-moving events this week is expected to keep the yen susceptible to haphazard trade flows.
The Japanese currency has rallied in recent weeks as foreign investors continued their love affair with Japanese stocks.
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