The dollar rose for a third straight session on Tuesday as gains on Wall Street and calmer financial markets enhanced appetite for currencies that offer higher yield. The euro and the yen, currencies with low interest rates used by investors to fund purchases of higher-yielding currencies in risky carry trades, were lower on the day after gains seen in a chaotic first week of the year.

"We're seeing a reversal of what we saw in that first week and the dollar has been benefiting as a result," said Sireen Haraji, currency strategist at Mizuho Securities in New York. An initial recovery in crude oil prices helped wipe out early falls for the Norwegian crown and the Canadian, Australian and New Zealand dollars.

Investors remained cautious, however, despite a rebound in stocks. Attention remained fixed on the gyrations of China's yuan and a fall in oil prices to $30 a barrel. In mid-morning New York trading, the dollar was up 0.4 percent against a basket of currencies to 99.078. The euro, meanwhile, lost 0.1 percent versus the dollar to $1.0848, while the dollar was up slightly at 117.78 yen. Sterling fell more than 1 percent against the dollar to $1.4387, after the release of poor British manufacturing numbers.

Copyright Reuters, 2016