The dollar rebounded against the euro and yen Tuesday after robust U.S. economic data reinforced expectations the Federal Reserve may start unwinding its stimulus program over the next few months.
Wall Street posted sharp gains, while benchmark U.S. 10-year Treasury yields rose to their highest in more than a year after the data, suggesting the world's largest economy was on a steady road to recovery. Higher Treasury yields have also boosted the appeal of dollar-denominated investments.
Gains in these assets were triggered by a U.S. consumer confidence index which increased in May to its highest in more than five years. That private-sector report on Tuesday followed data showing single-family home prices rose in March, racking up their best annual gain in nearly seven years.
(Read More: Soaring Consumer Confidence Points to US Resilience)
"Stronger-than-expected U.S. data brought the Fed a step closer to cutting back on stimulus as soon as the next few policy meetings," said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington.