The dollar was broadly weaker on Tuesday, falling to a one-month low against the euro in thin trading, as investors continued to scale back bullish bets on the greenback on the view that the Federal Reserve could reduce its asset-buying program later than expected.
Fed Chairman Ben Bernanke told lawmakers last week the U.S. central bank still expects to start scaling back its massive bond purchase program later this year, but he left open the option of changing that plan if the economic outlook shifted. He added that nothing was set in stone.
"In the absence of any economic news, positioning has been driving the FX market," said Brian Dangerfield, currency strategist at RBS Securities in Stamford, Connecticut.
Investors had accumulated dollars the last few months as Bernanke suggested in May that the Fed could start winding down its stimulus plan later this year. A reduction in the Fed's bond purchases would be positive for the greenback because it means that the U.S. central bank won't be flooding the market with dollars as much.
"The market is still quite long dollars and in quiet periods like today, traders are scaling back their positions especially in the wake of what Bernanke said last week."
The euro rose to $1.3238, its highest level since June 21, as some investors pushed it to the 50 percent Fibonacci retracement of the move from the early April low to the mid-June high. It was last at $1.3225, up 0.3 percent on the day, rising for a third straight day.