The euro traded at multi-week highs against the yen early on Tuesday and held firm against the dollar following a surprisingly strong performance overnight as expectations for additional stimulus from the European Central Bank waned.
The common currency reached a three-week peak of 142.18 yen, before slipping a touch to 141.97 yen. Against the Australian dollar, it hovered near a five-week high of A$1.4985.
But further big gains are unlikely in Asia with a public holiday in Japan set to dampen trade.
A source said ECB President Mario Draghi had told German lawmakers the central bank was still a long way off from implementing a bond-buying program even in the face of persistently low inflation.
Sounding a similar tune, ECB Vice President Vitor Constancio told reporters in Frankfurt that April's inflation figures due later this week should not alone trigger a policy change.Read More
Still, traders said any downside surprise in the inflation numbers will weigh on the euro, especially since the market is positioning for a pick up in price pressure.
German inflation figures are due later on Tuesday, ahead of the euro zone number on Wednesday.
"If the German price data fails to show any improvement, this would immediately raise expectations for an ECB easing as soon as May 8, and hurt the euro," analysts at BNP Paribas wrote in a note to clients.
The euro was only a tad firmer on the dollar at $1.3852 after recoiling from a two-week high of $1.3880. That helped the dollar index recover to 79.696 from a two-week low of 79.548.