The dollar weakened on Tuesday after Federal Reserve officials signalled that the central bank was nearing the end of its tightening cycle, though it traded in a tight range ahead of a key U.S. inflation report.

Several Fed officials said on Monday the central bank will likely need to raise interest rates further to bring down still-high inflation, but that the end to its current monetary policy tightening cycle is getting close.

The comments knocked the greenback to a two-month low of 101.88 against a basket of currencies in early Asia trade, as traders pared back their expectations of how much further U.S. interest rates have to rise.

Sterling meanwhile hit a fresh 15-month high of $1.2869, while the euro tacked on 0.03% to $1.1004.

The Japanese yen rose to a near one-month high of 141.15 per dollar on Tuesday and last bought 141.43 per dollar, drawing support from a slump in U.S. Treasury yields.

The dollar/yen pair is particularly sensitive to U.S. yields as interest rates in Japan are anchored near zero.

Elsewhere, the Australian dollar gained 0.16% to $0.6687, while the New Zealand dollar added 0.06% to $0.6216.

Gains in the two Antipodean currencies against the dollar were capped by China's faltering economic recovery, as both are often used as a liquid proxy for the Chinese yuan.

Source : Reuters