Investing.com - The dollar eased back from one-week highs against a basket of the other major currencies on Tuesday, while the euro edged higher amid ongoing concerns over political limbo in Germany.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, edged down 0.10% to 93.91 by 03:30 AM ET (08:30 AM GMT), not far from its overnight high of 94.02, the highest level since November 14.
The euro edged higher, with EUR/USD rising 0.14% to 1.1745, up from the one-week low of 1.1721 set on Monday after German coalition government talks collapsed.
The euro remained on the defensive after German Chancellor Angela Merkel said she could not form a coalition government and would prefer a new election to ruling with a minority, but Germany's president said political parties owed it to voters to try to form a government.
The prospect of prolonged political uncertainty in the euro area’s largest economy worried investors and is the latest episode of political turmoil to hit the region.
The euro was steady against the yen, with EUR/JPY at 132.20 after falling as low as 131.16 on Monday, its lowest since September 15.
Against the pound, the euro was also steady with EUR/GBP last at 0.8866.
The dollar inched lower against the yen, with USD/JPY dipping 0.09% to 112.51, holding above Monday’s low of 111.87, which was its lowest since mid-October.
Trade volumes remained relatively thin ahead of the U.S. Thanksgiving holiday on Thursday, which is also a national holiday in Japan.
Investors were looking ahead to remarks by Federal Reserve Chair Janet Yellen later on Tuesday, while the minutes from the Fed's November meeting were scheduled to be released on Wednesday.
Meanwhile, the Australian dollar was at four-month lows, with AUD/USD down 0.16% at 0.7540 after the minutes of the Reserve Bank of Australia’s November meeting showed that there was "considerable uncertainty" about how quickly wages growth and inflation might pick up.