The U.S. dollar fell against the euro on Tuesday after St. Louis Federal Reserve President James Bullard dented expectations the U.S. central bank may taper its bond purchases anytime soon.
But the dollar rose against the yen, a day before the Bank of Japan concludes a two-day policy meeting. Traders widely expect the yen to fall further on expectations Japan will continue its aggressive monetary easing.
Bullard, at an event in Frankfurt, said the Fed should continue quantitative easing, adjusting the pace of bond buying according to incoming data. He also said U.S. inflation has recently been below target.
"The fact that he supports continued easing is seen as a negative for the dollar because Bullard is one of the more hawkish members" of the Fed's voting committee, said Eric Viloria, senior currency strategist at Forex.com.
Comments from Fed officials were closely watched ahead of Chairman Ben Bernanke's testimony to Congress on Wednesday. The dollar has gained 5 percent so far this year on speculation the Fed may start winding down its stimulus sooner than expected, and investors will look to see if Bernanke drops any hint on that.