The U.S. dollar gained against the yen and riskier commodity currencies such as the Australian and New Zealand dollars on Tuesday after the impact of dovish remarks from a top Federal Reserve official faded, boosting sentiment toward the greenback.
The dollar had tumbled on Monday after comments from Fed Governor Lael Brainard reduced traders' bets on a rate hike by the central bank next week. Some analysts said, however, that the dollar was regaining ground after an exaggerated reaction to Brainard's comments on Monday.
"The impact of Brainard might have been somewhat exaggerated really by the fact the market was already skewed towards thinking the Fed would not hike rates in September," said Alan Ruskin, global head of FX strategy at Deutsche Bank in New York.
Traders trimmed their odds for a September rate hike to 15 percent on Tuesday, from 24 percent on Friday, according to CME Group's FedWatch program. Goldman Sachs further cut its view on the likelihood of a rate hike next week by the Fed, dropping it to just 25 percent, from 40 percent after Brainard's speech.