The dollar edged lower in Asian trade on Tuesday, with the yen getting a lift after the Bank of Japan held policy steady as expected at the conclusion of its two-day policy meeting.
Next up will be the US Federal Reserve, which begins its own two-day meeting on Tuesday. Major currency pairs are expected to tread familiar ranges as investors await fresh clues on the outlook for US monetary policy.
The BoJ removed language from its statement that it would cut interest rates further into negative territory if needed, and said it would exempt money reserve funds from the negative rates policy. It also offered a bleaker view of the economy than in January.
The dollar was down about 0.3 percent to 113.46 yen, while the euro slipped about 0.2 percent lower to 126.04 yen.
Most investors had expected the central bank to hold policy steady, as BoJ Governor Haruhiko Kuroda has said he hopes to spend more time assessing the economic impact of its negative interest rate policy that it unveiled in late January. Investors are now awaiting Kuroda's post-meeting press conference at 0630 GMT.
"Kuroda will face some awkward questions on why the yen is significantly stronger now than before negative rates were revealed," Sean Callow, senior currency strategist at Westpac, said in a note.
The dollar rose as high as 121.70 yen on January 29, immediately after the BoJ's announcement, but has since shed more than 6 percent.
The euro edged up slightly to $1.1108, within sight of last week's one-month high of $1.1218 touched after the European Central Bank chief Mario Draghi followed the bank's extensive easing on Thursday with comments suggesting further cuts were unlikely.
The dollar dipped about 0.1 percent against a basket of currencies, with the dollar index at 96.540, though it was holding well above a one-month low of 95.938 hit on Friday.
The Fed is seen standing pat on interest rates, and could also make clear that future hikes are on its agenda despite concerns about the strength of the global economy, as long as US inflation and jobs continue to strengthen.
On Monday, an increasingly important gauge of US inflation rebounded last month from record low levels, adding to other firming price measures that could help pave the way for future Fed interest rate hikes.
Analysts point to a much calmer global situation than in January, when the Fed noted the U.S economic slowdown, the decline in inflation, and external factors including China and oil prices.
"The focus for us is going to be on the 'dots' to see if there's any shift. Potentially, they could move lower, which may weigh on the dollar a little bit if that is the case," said Mitul Kotecha, currency strategist at Barclays in Singapore, referring to Fed monetary committee participants' "dot plots" of their interest rate expectations.
"I think the statement will be balanced, and we'll still continue to see some data dependency, with the economic outlook unchanged as well, so it shouldn't be particularly market-moving," he said.
Australia's central bank said in minutes of its March 1 policy review released on Tuesday that there were "reasonable prospects" for continued economic growth and it was still too early to assess whether a bout of global market volatility early in the year foreshadowed something more sinister.
Low inflation would give it room to ease policy but only if needed, the minutes showed. The Aussie was down 0.3 percent against its US counterpart at $0.7491.
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