The dollar had a bad day on most fronts, analysts and investors said, since the currency was already under siege despite a short tick up after a report showed US net capital inflows were in line with expectations in December. The inflows were sufficient to finance the nation's trade deficit for the month, but they did not signify a sustained trend.
US December net capital inflows were $61.3 billion, the Treasury Department said, higher than the $56.4 billion US trade deficit in December.
Greenspan's testimony on monetary policy will be closely watched for whatever he says about the current account stabilisation, whether he signals a pause in interest rate increases and any comment on plans for social security, said Mike Malpede, senior foreign exchange analyst at Refco Group Ltd in Chicago.
In late afternoon New York trade, the euro rose 0.5 percent against the dollar from late on Monday to $1.3021 after touching a high of $1.3052 earlier in the session, according to Reuters data. Against the yen, the dollar fell to 104.39 yen down around 0.7 percent from levels late on Monday.
The US currency slipped 0.7 percent against the Swiss franc to 1.1901 francs as demand for Swiss currency, the classic safe-haven asset, rose following news that the United States was withdrawing its ambassador from Syria.
Sterling was up 0.5 percent at $1.8967.
Federal Reserve Chairman Alan Greenspan begins twice-yearly testimony to congressional committees on Wednesday, and markets will be eager to see whether he repeats upbeat comments made in London this month about the outlook for the current account.
Some of the downdraft in the dollar reflected a reluctance by many investors to take a strong position in the market ahead of Greenspan's testimony. Expectations on his thinking on the economy vary widely, as do opinions on whether he will be hawkish or dovish going forward.
The yen received a boost from investors buying the Japanese currency ahead of a Japanese gross domestic product report for the fourth quarter.