The dollar slipped on Tuesday on modest position adjustment by dealers as the greenback's yield advantage narrowed slightly ahead of upcoming US economic data.
Financial markets shifted back to thinking the European Central Bank will raise rates in June, while at the same time trimming back some of their expectations of how high US interest rates will rise in the coming months.
Iran's announcement that it possesses nuclear technology triggered some flow into the "safe haven" Swiss franc, sending the dollar down 0.4 percent to 1.2971 francs.
On the margins, these developments put the dollar under light, downward pressure, although ranges remained narrow ahead of US trade data on Wednesday.
Comments from Minneapolis Fed President Gary Stern in Berlin late in the day that strong jobs growth does not necessarily stoke inflation kept the dollar near its session lows.
"The dollar is marginally soft here, we're not talking big moves," said Matt Kassell, head of currency strategy at IDEAglobal in New York.
"The market ran into levels where people wanted to buy euros again but I think the market is a little bit hesitant to buy (aggressively) into euro strength so we're just seeing a gradual rise here," he said.
At 4:30 pm EDT (2030 GMT) the euro was up 0.3 percent at a session high around $1.2150, and sterling was up 0.3 percent to $1.7486.
The spread in favour of the dollar between two-year US and euro zone bond yields narrowed by a couple of basis points on Tuesday, giving the euro some modest support.
Against the yen, the dollar had earlier hit one-month highs around 118.90 yen after the Bank of Japan left interest rates near zero and gave no indication that it would raise them in the near term.
But in US trading the dollar erased all its gains to trade down 0.1 percent on the day at 118.21 yen.
The dollar remained stuck in broad ranges. Dealers are looking to US economic data releases later in the week for direction, starting on Wednesday with February's anticipated $67.5 billion trade gap.
"The market does not have much interest at the moment so I would not read too much into what happens this afternoon," said a US bank trader.
Interest rate futures have fully priced in the Fed's raising of its benchmark rate to 5.00 percent at its May 10 meeting and around a 50 percent chance of a hike to 5.25 percent on June 29.
Michael Woolfolk, senior currency strategist at Bank of New York, said the ECB is "clearly set on a process of (rate) normalisation," meaning a hike in June is on the cards.
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