The dollar slipped against most major currencies on Tuesday, hitting a three-month low versus the euro, as expectations of multiple decreases of US interest rates by the Federal Reserve have spurred selling of the US currency.
Growing tensions between Iran and the United States stoked fresh safe-haven buying of yen, which reached its strongest levels against the greenback since early January.
Traders await fresh clues on the Fed's stance on possible rate cuts, starting as soon as next month. A number of Fed officials were scheduled to speak on Tuesday with Fed Chairman Jerome Powell due at 1 pm. (1700 GMT).
Last week's signal from the US central bank that it was ready to lower borrowing costs to counter slowing domestic growth and sluggish inflation caused traders to exit their earlier bullish positions on the dollar, analysts said.
Interest rates futures implied traders fully priced in a quarter-point rate cut from the Fed next month and saw high rising probability of at least two more cuts after July.
Falling US bond yields and bearish technical indicators have stoked the view the greenback would have more room to fall in the coming months, analysts said.
"This has more legs to go," said Paresh Upadhyaya, director of currency strategy at Amundi Pioneer Investments in Boston.
At 10:55 am. (1455 GMT), the dollar was down 0.34% at 106.94 yen after hitting 106.78 yen during Asian trading, which was its weakest since Jan. 3.
Demand for the yen was underpinned by new US sanctions against Iran's supreme leader and foreign minister. Iran said on Tuesday the move had closed off diplomacy between the two countries. The greenback was 0.13% lower versus the pound. It was modestly weaker against the Canadian, Australian and New Zealand dollars. On the other hand, the euro was down 0.12% at $1.1384. The single currency retreated from $1.1412 earlier Tuesday, which was its highest since March 21. The dollar index moved further away from its 200-day moving average at 95.995.