Reserve Chair Janet Yellen offers clues to the likely pace interest rate increases in her congressional testimony.
The dollar
weakened 0.3 percent on the day to stand at 113.43 yen, off Monday's high of
114.17 but well above a 10-week low of 111.59 yen touched a week ago.
It touched
its session low of 113.39 yen shortly after news that Flynn resigned late on
Monday under scrutiny over whether he discussed the possibility of lifting U.S.
sanctions on Russia before Trump took office.
"The
news weighed on the dollar against the yen because it's a hard situation to
understand, and also to understand what kind of broader fallout it will
have," said Kumiko Ishikawa, FX market analyst at Sony Financial Holdings.
Slumping
Japanese equities also put upward pressure on the yen. The Nikkei stock average
was down 0.7 percent, extending losses in afternoon trading after Toshiba Corp
unexpectedly delayed the release of its quarterly earnings and details of a
multi-billion dollar writedown to its nuclear business.
The dollar
index was down 0.1 percent on the day at 100.84, edging away from Monday's high
of 101.11, its highest level since Jan. 20.
Yellen will
present the U.S. central bank's semi-annual report on monetary policy and the
economy in testimony to the Senate Banking Committee on Tuesday, followed by a
the semi-annual monetary testimony before the House Financial Committee on
Wednesday.
"People
are just waiting for Yellen's testimony, and depending on what she says, the
dollar could test the upside again," said Kaneo Ogino, director at foreign
exchange research firm Global-info Co in Tokyo.
"But a
few Japanese exporters are selling dollars at the moment, disappointed that it
didn't go even higher after the weekend meeting" of U.S. President Donald
Trump and Japanese Prime Minister Shinzo Abe, who apparently did not discuss
currency policy or trade protectionism, Ogino said.
Abe said on
Tuesday he agreed with Trump that currency issues should be left for the
finance leaders of each country to discuss.
Dallas
Federal Reserve Bank President Robert Kaplan, a voter this year on the Fed's
policy-setting panel, said on Monday in remarks prepared for posting to the
Dallas Fed website that the U.S. central bank should act soon to raise rates or
risk having to abandon its plan to do so slowly.
"Yellen
does not need to say anything in detail. I think she'll be very cautious, so
currencies might not move so much," said Masashi Murata, senior strategist
at Brown Brothers Harriman.
"She
might suggest some possibility of the Fed hiking rates in March, but I think
that risk is very small," he added.
Interest
rates futures showed investors pricing in only about a 1 in 5 chance the Fed
will increase rates at its meeting next month, according to CME Group's
FedWatch program.
The dollar
also got a lift from Trump's promise last week of a "phenomenal" tax
plan that the White House said would include tax cuts for businesses and
individuals. The hopes raised by his comments helped lift U.S. stocks to record
highs on Monday.
The euro,
which has come under pressure in recent sessions as France's election campaign
has heated up, was up 0.1 percent at $1.0611.
French
presidential frontrunner Emmanuel Macron is being targeted by Russian media and
internet attacks from within Russia with the goal of helping the election
campaigns of his pro-Moscow rivals, his party chief said on Monday.
*REUTERS*
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