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The dollar was mixed on Tuesday amid a modest increase in risk appetite as US stocks looked to rise for a second day.
Traders were turning their attention to today's pending home sales figures, looking for signals that the housing market is gradually improving following the worst downturn in decades.
The National Association of Realtors will release its pending home sales data at 10 AM ET. The index is expected to show a rise of 1.1% for December
At the same time, Treasury Secretary Timothy Geithner is due to testify before the Senate Finance Committee on the fiscal year 2011 budget. Also, Paul Volcker, the Chair of the President's Economic Recovery Advisory Board, will testify on regulations to limit high-risk bank activities before the Senate Banking Committee in Washington.
Still, activity on the currency markets may be slightly muted ahead of this week's pivotal jobs data.
The ADP National Employment report, which sheds light on non-farm private employment, is scheduled to be released on Wednesday. Two days later, the Labor Department is scheduled to release its monthly employment report. Economists estimate that the U.S. economy added 13,000 jobs in January and expect the unemployment rate to remain unchanged at 10%.
This morning's biggest move came against the aussie after the Reserve Bank of Australia maintaned the overnight cash rate, its key interest rate, at 3.75%.
The decision was not anticipated, with markets widely expecting a fourth successive 25 basis points hike. On the news, the buck jumped to a monthly high of .8779 before drifting slightly lower.
The dollar eased to 1.3975 versus the euro, extending its move away from last weekend's 6-month peak near 1.3850.
Eurozone producer prices continued to decline in December on an annual basis, suggesting that underlying inflationary pressures remain muted in the region. The European Central Bank is seen having room to maintain its record low interest rate of one percent until prices show signs of rising.
The producer prices index, or PPI, fell 2.9% year-on-year in December after a 4.4% drop in November, data released by Eurostat showed Tuesday.
The dollar was little changed at 1.5940 versus the sterling, staying within a penny of yesterday's monthly high near 1.5850.
Tuesday, the latest Purchasing Managers' Index survey for the British construction sector showed that the headline index rose unexpectedly in January. But the index continued to stay below the neutral level of 50 suggesting a weaker pace of activity at the start of 2010.
The dollar also held its ground versus the yen, hovering at 90.70 approaching mid-morning.
However, the dollar was on the defensive versus the commodities-backed loonie, as metals and energy prices rebounded from steep recent losses. The buck slipped to C$1.0580 against its Canadian counterpart.
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