The dollar edged broadly lower on Tuesday but traded in a narrow range, as investors remained cautious ahead of key U.S. inflation data due later in the day just as the Federal Reserve kicks off its two-day monetary policy meeting.

In Asia, China's yuan fell to a six-month low after the central bank lowered a short-term lending rate for the first time in 10 months, in a bid to restore market confidence and prop up its stalling post-pandemic recovery.

The onshore yuan bottomed at 7.1680 per dollar, its lowest since last November, and last traded at 7.1618.

Its offshore counterpart was last 0.2% lower at 7.1709 per dollar, having weakened to a fresh six-month low of 7.1782 earlier in the session.

Market attention now turns to the U.S. Labor Department's CPI report due later on Tuesday, which is expected to show inflation cooled slightly in May and could give the Fed room to pause its aggressive rate-hike cycle when it announces its interest rate decision on Wednesday.

The Aussie rose 0.23% to $0.6766, after hitting a one-month top of $0.6774 in the previous session.

The kiwi steadied at $0.6126, not far from Monday's peak of $0.6153, its highest since May 24.

Elsewhere, sterling rose 0.16% to $1.25315, after scaling a one-month peak of $1.2600 on Monday on hawkish comments by Bank of England policymakers, who said interest rates may have further to rise as inflation remains sticky.

The euro peaked at $1.0792, its highest since May 24, with traders also focused on Thursday's interest rate decision from the European Central Bank, following its policy meeting.

Against the Japanese yen , the dollar slipped 0.06% to 139.52.

The U.S. dollar index fell 0.17% to 103.40, languishing near Monday's trough of 103.24, its lowest since May 23.

The Bank of Japan (BOJ) is due to announce a monetary policy decision on Friday and is expected to maintain its ultra-dovish stance and yield curve control (YCC) settings.

Source : Reuters