The dollar was steady against major currencies on Tuesday, with market players bracing for a Federal Reserve meeting and a heavy week of US data that will give more clarity on whether the economy is on the verge of recession.
Traders said financial markets remain volatile and can shift on a dime as investors try to sort out how badly the US economy is faring and whether expectations for aggressive Fed rate cuts will lead to renewed selling of the dollar.
The yen edged up, partly on Japanese investors repatriating funds, even as the Nikkei share average rallied 3 percent following a surge in US shares on chances of an aggressive Fed rate cut on Wednesday following a two-day meeting.
Shares and currencies have fluctuated wildly since the start of the year, with the Fed's emergency rate cut last week helping stem a frantic sell-off in stocks that has since been blamed partly on French bank Societe Generale unwinding positions amassed by a rogue trader.
"The markets are still looking for a proper trend for the year and working through a lot of conflicting signals," said Rick Lloyd, head of G10 currency trading at ABN Amro in Singapore. "People are struggling for direction at the moment."
Markets showed little reaction to President George W. Bush's final State of the Union address in which sought to ease concerns about the US economy and urged Congress to pass a $150 billion stimulus package.
The dollar dipped 0.2 percent from late US trade to 106.62 yen pulling away from the day's high of 107.14 yen. Last week the US currency hit a nearly three-year low of 104.95 yen.
The euro fell 0.3 percent to 157.46 yen and has suffered big swings against the Japanese currency while clawing back from a five-month low of 152.10 yen touched last week. The euro edged down 0.1 percent to $1.4767 a touch lower on the day after matching a two-week high near $1.4800.