The dollar struggled to pull itself up from a one-month low against the euro on Tuesday as investors awaited US inflation data later in the day for clues on the future path of interest rates.
News of a record US trade deficit and weak activity data have weighed on the dollar in recent days and the greenback failed to get lasting support even after data on Monday showed foreign appetite for US assets remained strong.
With attention polarised on the outlook for the US economy and monetary policy, the euro was able to shrug off a survey showing a larger than expected drop in German investor confidence.
"There are big questions over the global growth picture and the US tightening cycle, so the market is more concerned with US rather than European news," said Bilal Hafeez, foreign exchange strategist at Deutsche Bank.
The dollar was trading at $1.2332 to the euro and 110.52 yen at 1140 GMT, just a fraction higher on the day. But the greenback was still nursing heavy losses from Friday when data showed the US trade deficit widened to a record $55.8 billion in June.
A survey by Germany's ZEW institute showed investor confidence in Europe's biggest economy fell to its lowest level in 13 months in August as rising oil prices dampened recovery hopes.
Figures on US consumer prices, housing starts and industrial production for July are due at 1230 GMT and could shed light on the health of the world's biggest economy.
The headline consumer price index is expected to rise 0.1 percent from June, according to a Reuters poll. Excluding volatile food and energy items, prices are expected to have risen 0.2 percent on the month.
"The market is expecting the continuation of a benign inflation environment, especially after recent weak data," said Umberto Alvisi, currency strategist at CSFB. "The market is questioning if the US is going for a moderation in terms of economic activity."
The dollar has had a run of disappointing US data over the past few weeks. Weak US jobs numbers earlier in the month cast doubt on the strength of the economy and raised questions whether the Federal Reserve would be able to continue an expected series of yield-enhancing rate hikes.