NEW YORK: The dollar dropped for a second straight session on Tuesday, with broader risk appetite turning more positive, as investors prepared for US Treasury Secretary nominee Janet Yellen to talk up the need for major fiscal stimulus and commit to a market-determined exchange rate.

The dollar’s fall came after a 2% rise so far in 2021, a gain which caught off guard many investors who had bet on a further decline following its weakness in 2020.

The dollar has been helped in January by rising US Treasury yields and some investor caution about the strength of the global economic recovery from the coronavirus pandemic. But most analysts are sticking with their calls for a weaker dollar from here.

Yellen is expected to appear before the Senate Finance Committee later on Tuesday.

The dollar index, which measures the currency against a basket of other currencies, dropped 0.3% to 90.481, but it was still above its more than two-and-a-half-year low of 89.206 touched at the start of this month.

With the dollar weakening, the euro gained, rising 0.5% to $1.2134.

More volatile and commodity-linked currencies, such as the Australian dollar, also benefited from the weaker US currency, with the Aussie up 0.4% at $0.7712.

Sterling rose 0.2% against the dollar to $1.3610.

The dollar rose 0.2% against the yen to 103.93 yen, although still consolidating in a narrow range after reaching a one-month high of 104.40 last week.