The dollar rose on Tuesday as investors waited on inflation data for further signs of whether price pressures are ebbing and what it means for further Federal Reserve interest rate hikes.
Consumer price data on Wednesday is expected to show headline inflation rose by 0.2% in March, while core inflation rose 0.4%.
"A lot of traders are focused on this inflation data," said Edward Moya, senior market analyst at OANDA in New York. "Everyone's trying to get a sense of does the disinflation process return and does this complicate what the Fed does."
The Fed is seen as likely to hike rates by an additional 25 basis points at its May 2-3 meeting, before pausing in June. Markets are also pricing for the Fed to cut rates by year-end on an expected recession, though Fed officials have stressed the need to keep rates high in order to bring down inflation.
Strong jobs data for March have added to expectations that the U.S. central bank will complete one more rate hike. The data on Friday showed employers added 236,000 jobs while the unemployment rate fell to 3.5%.
The dollar index rose 0.1% to 102.22. The euro, however, gained 0.4% to $1.0906.
The euro was also likely boosted by a rise in European bond yields on Tuesday as traders in the region returned after markets were closed on Friday and Monday for the Easter holiday.
Algorithms trading currencies based on the difference between European and U.S. rates might have sold euros for dollars when U.S. Treasury yields rose after the jobs data while European bond markets were closed, said Simon Harvey, head of FX analysis at Monex Europe.
European bond yields rose sharply on Tuesday, catching up after the break. GVD/EUR
"There's just that catch-up effect flushing through," Harvey said.
The dollar also slid against the yen, after jumping on Monday as Bank of Japan Governor Kazuo Ueda signaled no hurry to dial back its massive stimulus. The dollar was last down 0.33% against the Japanese currency at 133.16.