Market sentiment was likely to remain subdued as investors awaited risk events, such as the outcome of the FOMC meeting and release of U.S. second-quarter GDP, due later in the week, OANDA senior trader Stephen Innes told CNBC. Particularly of note would be the Federal Reserve's outlook on inflation, he said, adding that the central bank was likely to sound dovish.
Uncertainty over the Trump administration's policies was also expected to weigh on the dollar in the near term, Innes said.
The dollar index, which measures the greenback against a basket of currencies, declined to its lowest levels in 13-months after giving up slight gains made in the previous session. The dollar index traded at 93.850 at 3:02 p.m. HK/SIN after falling as low as 93.815 earlier in the session.
Against the yen, the greenback retraced earlier gains, last fetching 110.93 yen compared to levels around the 111.1 handle seen earlier in the week.
National Australia Bank currency strategist Rodrigo Catril cautioned that U.S. politics could be a "big test" ahead of the Federal Reserve's interest rate decision expected Wednesday afternoon in the U.S.
The Senate will take a procedural vote Tuesday on whether the Republican health-care bill will be opened for debate or amendments. Ahead of the vote, President Donald Trump increased the pressure on Senate Republicans to support an overhaul to the health-care system, adding that they had "not done their job in ending the Obamacare nightmare."
"Opening the debate on repealing and replacing the Obamacare bill could be a positive for the U.S. dollar as it would improve the prospect for the Trump administration to get its infrastructure spending and tax reform agenda back on track," Catril said in a Tuesday note.
In individual stocks, South Korean semiconductor manufacturer SK Hynix reported record operating profits of 3.1 trillion won ($2.78 billion) in the second quarter due to strong memory chip demand — a rise of 574 percent compared to one year ago, Reuters said. The figure beat a Thomson Reuters StarMine estimate of 3 trillion won.
SK Hynix shares closed down 3.56 percent after finishing at a record high in the previous session.
In Japan, shares of most automakers closed higher as corporate reporting season kicked off. Toyota was up 0.46 percent, Honda shares rose 0.79 percent and Mazda Motor gained 0.16 percent.
Other market movers included Hong Kong-listed property companies linked to a high profile deal involving Dalian Wanda. Property developer Sunac China Holdings announced it agreed to a $516.4 million share sale on Tuesday, Reuters reported. As part of the deal, Sunac said 220 million shares would be issued to undisclosed investors, the news agency said. Sunac is buying a 91 percent share in several Wanda tourism projects for 43.8 billion yuan, Wanda announced last week.
Sunac shares were down 6.87 percent, Guangzhou R&F declined 0.45 percent and Wanda Hotel Development rose 6.94 percent. Most major Hong Kong property stocks trended lower.
On the energy front, oil prices extended gains after rising more than 1 percent in the overnight session on news that Saudi Arabia would reduce its exports in August. At a meeting in St Petersburg, the OPEC monitoring committee also said Nigeria — which was originally exempt from an OPEC-led production cut — would be capping its output.
Brent crude rose 0.47 percent to trade at $48.83 per barrel and U.S. crude gained 0.54 percent to trade at $46.59.
Meanwhile, the euro trended higher after dipping overnight on the release of soft manufacturing activity indicators. The euro last traded at $1.1656 after touching as low as $1.1630 in the overnight session.
In economic news, the Bank of Japan's monetary policy meeting minutes reflected that board members agreed policy had to remain easy as the central bank's 2 percent inflation target was distant, Reuters reported.
Markets are expected to keep an eye on economic indicators and events in Europe and the U.S. after the end of the Asian trading day, with Germany's Ifo business climate index and expectations for July due at 4:00 p.m. HK/SIN. Stateside, the FOMC's two-day meeting will begin later Tuesday.
Over in the U.S., stocks closed mostly lower in the Monday session, with earnings reports from large technology names coming in after the market close.