The dollar slid against a basket of the other major currencies on Tuesday, while sterling fell to fresh two-month lows as uncertainty over the U.K. governments Brexit plans continued to weigh.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.18% to 101.74, retreating further from last week's high of 103.82, which was 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.
GBP/USD touched lows of 1.2106, the lowest level since October 25 and was last at 1.2116, off 0.3% for the day.
The selloff in sterling came after British Prime Minister Theresa May said Sunday that the country would not be keeping "bits" of European Union membership.
The remarks were seen as an indication that the UK won’t try to negotiate continued full access to the European single market when it leaves the EU.
Sterling failed to find support after May said on Monday it was wrong to say a "hard Brexit" was inevitable.
The pound was at two-month lows against the euro, with EUR/USD advancing 0.56% to 0.8745.
The euro also gained ground against the softer dollar, with EUR/USD rising 0.22% to 1.0598, extending its recovery from last week’s 14-year low of 1.0339.
The dollar slid against the yen, with USD/JPY down 0.24% to 115.71, but was off overnight lows of 115.2 as markets in Japan reopened after a holiday on Monday.