The dollar index softened to 101.3 on Tuesday after testing a 15-month high of 101.6 in the previous session as softer energy prices limited the outlook of a rate hike by the Federal Reserve this year.
US officials stressed that a diplomatic resolution may still be achieved with Iran in their war, driving fuel prices to ease off their local peaks and trimming the risk of a rebound in energy inflation.
Still, fuel prices remained elevated in a historical level as exports from the Middle East are still low.
A portion of FOMC members had recently signaled that higher inflation and evidence of a robust labor market could warrant higher rates.
The Federal Reserve is expected to hold its policy rates unchanged tomorrow, but rate futures continued reflect the consensus of a hike this year.
The greenback held recent gains against the euro and the yen, although political volatility in the UK maintained the sterling's recent appreciation.