The US dollar ticked lower for a second day against major peers on Tuesday, as market jitters from US military action in Venezuela eased and stocks rallied around the world, helped by dovish comments from Federal Reserve officials.
The euro was up marginally at $1.1729, the pound was 0.1% higher at $1.3552 while the dollar was also a touch softer against the Japanese yen at 156.37 yen.
"A little over 48 hours after the US military operation in Venezuela, there are few marks left in the currency market. Early Monday's flight into dollar safety proved very short-lived," said Francesco Pesole, FX analyst at ING.
The impact of the shock US capture of Venezuelan President Nicolas Maduro over the weekend was short-lived across most asset classes with stocks around the world trading at record highs.
That also had ripple effects in currency markets.
"The good performance of equities yesterday, despite geopolitical risk, was, in our view, the primary driver of the unwinding of earlier dollar gains," Pesole added.
The dollar index, which measures its strength against a basket of six currencies, was last trading at 98.25, down 0.1% and extending losses after snapping a four-day winning streak on Monday.
AUSSIE, KIWI OUTPERFORM
Currencies like the Australian and New Zealand dollar that are sensitive to global investor sentiment and often move in line with stocks have been outperforming.
The Aussie dollar hit an over one-year high of $0.6739 and ??the kiwi was up 0.13% at $0.5797.
Also in the mix was soft Monday US data showing manufacturing activity contracted more than expected in December and fell to a 14-month low.
And the dollar was further pressured on Monday by dovish comments from Minneapolis Federal Reserve President Neel Kashkari, a voter on the central bank's rate-setting committee this year, who told CNBC ??he sees a risk that the jobless rate could "pop" higher.
Expectations of policy easing edged up after his remarks, ??though Fed funds futures are still pricing around an 80% chance that interest rates will remain on hold at the US central bank's next meeting on January 27 to 28, according to the CME Group's FedWatch tool.
Against the Chinese yuan trading offshore in Hong Kong, the US dollar was last down marginally at 6.983 yuan.
The only major currency against which the dollar was marginally stronger was the Swiss franc. The dollar was last up 0.08% on the franc at 0.7922.
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