The Aussie gained further on Tuesday after the central bank held steady as expected, but signaled repeated concern on housing prices in some markets.
The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, eased 0.08% to 98.90. USD/JPY changed hands at 111.89, up 0.04%, while AUD/USD traded at 0.7551, up 0.33%.
The Reserve Bank of Australia released its latest monetary policy review and held steady at a record low 1.5% as expected.
In Asia, the Bank of Japan released minutes from its March policy meeting and policymakers agreed to closely monitor consumer prices because they currently lack upward momentum. The minutes repeated earlier phrasing that over time, consumer prices will reach the central bank's 2 percent inflation target, but the BOJ needs to continue with its quantitative easing, according to the minutes.
Last week on April 27, the Bank of Japan raised its economic forecasts at its policy meeting outcome on Thursday, but it kept policy steady, as was widely expected.
As well, the Caixin manufacturing PMI for April came in at 50.3, compared with an expected level of 51.2, taking the measure to a seven-month low. The figures follow official data released on Sunday. China's Purchasing Managers' Index (PMI) fell to a six-month low of 51.2 in April from March's near five-year high of 51.8. The private sector Caixin/Markit PMI manufacturing survey focuses more on small and mid-sized firms.
Overnight, the dollar traded higher against a basket of major currencies on Monday, despite the release of downbeat economic data while bullish comments from U.S. Treasury Secretary Steven Mnuchin had little impact on the greenback.
In what was timid day of trading, as most of Europe observed Labour Day, the dollar pared losses sustained in early morning trade, despite bearish manufacturing and construction spending data.
The Institute for Supply Management (ISM) said its index of national factory activity dropped to a reading of 54.8 last month - the weakest reading since December, from 57.2 in March.
In a separate report, the Commerce Department said U.S. construction spending slipped 0.2 percent for the month of March. Analysts had forecast a slower decline to 0.4% from 1.8% a month earlier.
Elsewhere, U.S. Treasury Secretary Steven Mnuchin said on Monday, that it will probably take two years for the U.S. economy to achieve 3% growth, and highlighted the Trump administration's tax reform and regulatory relief plans as key catalysts to induce economic growth.
"In our projections it will probably take two years to get up to three percent growth and then we can have a sustained level." Mnuchin said.
Meanwhile, GBP/USD pulled back from six-month highs to trade at $1.2912, down 0.30%, after Brexit rhetoric began to surface, as news broke that European Union leaders are likely to demand that the UK agrees to pay its liabilities to the EU before a new trade deal can be discussed.