The Aussie gained in Asia on Tuesday after a business survey that came in lower than expected but still pointed to upbeat views on the economy.
AUD/USD traded at 0.7559, up 0.24%, while USD/JPY was last quoted at 110.03, up 0.07%. GBP/USD fell 0.06% to 1.2652.
The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, rose 0.06% to 97.21.
The National Australia Bank released its May business confidence survey that showed a plus-7 figure, down from the previous reading at plus-13, and its business survey at plus-12, also down from the previous figure at plus-14. "The strength looks to be quite broad-based, with all industries recording positive business conditions for only the second time since 2010," said NAB chief economist, Alan Oster.
Overnight, the dollar traded flat against a basket of global currencies on Monday, failing to capitalise from a slump in sterling, but expectations that the Federal Reserve will increase its benchmark rate on Wednesday limited downside momentum. The dollar bounced off lows as investors looked ahead to the prospect of a U.S. interest rate hike on Wednesday stemming the recent fall in the greenback, which has wiped out all its gains since Donald Trump was elected as U.S. president.
According to Investing.com's Fed rate monitor tool, 90% of traders expect to the Fed to increase its benchmark rate from 0.75-1% to 1-1.25% after its two-day meeting concludes on Wednesday.
While the interest rate hike is widely expected, investors are cautious about a potential shift in tone on the prospect of the U.S. economy from Fed chair Janet Yellen, who is slated to field questions in a press conference after the Federal Reserve's interest rate decision. The expected rate hike comes against a backdrop of U.S. economic jitters, as the most recent U.S. job numbers failed to match expectations, while a slump in energy prices threatens to curtail the pace of inflation.
Meanwhile, in the UK, the pound struggled to hold onto a slender lead against the dollar, dropping as low as $1.2681, as political uncertainty continued to dominate moves in sterling amid investor concerns about the upcoming Brexit negotiations.
Elsewhere, first-round voting on Sunday put Emmanuel Macron's La REM on course to secure an overwhelming parliamentary majority, which could give Macron a relatively free rein to push through his economic and social plans.