The dollar was lower against a basket of the other major currencies on Tuesday, while sterling pulled back from two-month lows hit as investors continued to fret over Brexit.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slid 0.2% to 101.72. The index has retreated since touching highs of 103.82 last week, the strongest level since 2002.
Demand for the greenback continued to be underpinned by expectations for higher interest rates this year.
The Federal Reserve raised interest rates in December and indicated that it expects to hike rates three more times in 2017.
Boston Fed President Eric Rosengren on Monday called for the U.S. central bank to step up the pace of interest rate increases, warning that inflation could overshoot its target if it does not.
Sterling edged higher after falling to two-month lows earlier amid fears that the UK won’t try to negotiate continued full access to the European single market when it leaves the European Union.
GBP/USD touched lows of 1.2106, the lowest level since October 25 before retracing losses to trade at 1.2173, up 0.12%.
The pound hit two-month lows against the euro, with EUR/USD rising as high as 0.8763, before pulling back to 0.8697.
The euro inched higher against the softer dollar, with EUR/USD edging up 0.1% to 1.0585.
The dollar fell to the day’s lows against the yen, with USD/JPY falling 0.51% to 115.42.
In emerging markets, the Mexican peso and the Turkish lira fell to fresh record lows against the greenback as political and economic woes continued to weigh.
USD/MXN was up 0.88% to 21.56 after hitting highs of 21.62 earlier amid ongoing fears over potential changes to U.S. trade policy under the incoming Trump administration.
USD/TRY climbed 1.41% to trade at 3.7658 after starting the day at 3.7135.
The selloff in the lira gathered pace after ratings agency Moody's said Monday that bank profits will be hit by an increase in bad loans this year and warned of a "general worsening" in the investment climate in Turkey.