The U.S. yield curve remained inverted after interest rates on three-month Treasury bills moved above the yields on 10-year notes for the first time since mid-2007 last Friday.
This market phenomenon, which has preceded every U.S. recession over the past 50 years, triggered a dramatic selloff in stock markets across the globe late last week and a stampede into longer-dated U.S. government debt, putting some pressure on the greenback.
Still, the selling in dollars has been modest as the U.S. economic expansion is still on track to reach a record-long run this year despite evidence of flagging since late 2018, analysts said.
"There is a reluctance to buy dollars, while the bar for selling dollars has been relatively high because people have been burned before," said Steven Englander, global head of G10 FX research at Standard Chartered Bank in New York.
An index that tracks the greenback against a basket of major currencies was 0.16 percent higher at 96.722. It touched 96.745 earlier on Tuesday, near a 1-1/2-week peak.
Ten-year Treasury note yields were 2.414 percent in late U.S. trading, holding above a 15-month low of 2.3770 percent set on Monday. The premium on three-month T-bill rates was a little more than 4 basis points, about half a basis point more than Monday, Refinitiv data showed.
p>(GRAPHIC: U.S. yield curve inversion March 26 - https://tmsnrt.rs/2HHvEjY
The dollar held steady despite a government report that showed U.S. developers broke ground for single-family homes at the slowest pace in over 1-1/2 years in February.
The Conference Board said its gauge of American consumers' mood dipped to 124.1 in March, falling short of a 132.0 forecast by analysts polled by Reuters.
The euro slipped on Tuesday, reversing some of Monday's gains tied to a stronger-than-forecast German business confidence survey.
The euro was down 0.3 percent at $1.1278.
With the dollar mixed across the board, risk appetite recovered, helping to lift the Australian dollar, the Swedish crown and the Norwegian crown.
On the other hand, reduced safe-haven bids caused the yen to fall 0.46 percent to 110.475 per dollar after touching a six-week peak on Monday.
Meanwhile, sterling gained 0.11 percent at $1.3212 after two eurosceptic lawmakers indicated they could agree to support British Prime Minister Theresa May's deal to leave the European Union rather than risk the British parliament cancelling Brexit altogether.
British lawmakers will vote Wednesday on a range of options, giving parliament a chance to indicate whether it could agree on a deal with closer ties to Brussels and then try to push the government in that direction.
APHIC: Sterling pre- and post-Brexit referendum - https://tmsnrt.rs/2HGqFjQ
(Additional reporting by Tom Finn in LONDON and Shinichi Saoshiro in TOKYO; Editing by Bernadette Baum and James Dalgleish)
By Richard Leong