At 03:55 ET (08:55 GMT), the Dollar Index, which follows the dollar versus a basket of six other currencies, increased 1% to 104.345.
Tuesday’s main economic clearance is the U.S. manufacturing PMI for December, which should show the sector is still in squeeze territory.
Nevertheless, most eyes will be on the Federal Reserve minutes on Wednesday and U.S. jobs data later in the week to arrange the early thinking on interest rates in the new year.
The Fed increased interest rates by 50 basis points last month, a drop in height after delivering four successive 75 basis point hikes, but has said it may need to hold interest rates higher for longer to tame inflation.
USD/JPY dropped 0.1% to 130.69, with the yen handing back returns following rising to a seven-month high versus the dollar following the Bank of Japan’s decision last month to raise its bond-yield cap.
Counting to the expectations that the Japanese central bank was reconsidering its present monetary stance was a Nikkei report released over the weekend that reported the BOJ was considering increasing its inflation projections in January.
Supporting Yen
Governor Haruhiko Kuroda has overlooked the chance of a near-term exit from the ultra-loose monetary policy. Nevertheless, the central bank had to support the yen late last year as it diluted to a 32-year low against the dollar as the U.S. Federal Reserve aggressively compressed to combat inflation.
Elsewhere, EUR/USD dropped 0.9% to 1.0566, ahead of the release of key German inflation data, which should show a reduction in yearly inflation to 9.1% in December from 10.0% the prior month.
The state of North Rhine-Westphalia, Germany’s largest by population and economic output, said yearly inflation had a cap of 8.7% in December from 10.4% in November and a peak of 11% in October.