The U.S. dollar slipped against a basket of major currencies on Tuesday on continued expectations that the Federal Reserve will not hike interest rates this year, while uncertainty over the outcome of a Bank of Japan meeting capped the yen's gains.
Commerce Department data showing the largest expansion in the U.S. trade deficit in five months in August reinforced expectations that the Fed would delay hiking rates for the first time since 2006 until next year. A weak U.S. jobs report on Friday has also driven expectations of a later Fed rate hike.
That outlook hurt the dollar, which is likely to benefit from eventual rate hikes as they are expected to drive investment flows into the United States.
"People are still very skeptical about the Fed raising rates this year," said Thierry Albert Wizman, interest rates and currency strategist at Macquarie Ltd in New York.