The U.S. currency fell against a basket of currencies after Russian President Dmitry Medvedev commented ahead of Brazil, Russia, India and China, so-called BRIC,

summit that the existing reserve currencies, including the U.S. dollar, have not performed their functions and a creation of a new supranational reserve was needed to be used for international settlements. However, the summit ended with a communique which demanded more power for developing nations in international financial institutions and the United Nations without mentioning the U.S. dollar’s role as a reserve currency.

Euro rose against the greenback as Medvedev suggested a need for a global reserve currency other than the U.S. currency ahead of BRIC summit. In European session, German posted much better-than-expected Zew sentiment data which came in at 44.8 in June, surging from 31.1 in May. This gives hopes to investors that German, the largest eurozone economy, will recover later this year. In addition, the release of stronger-than-expected eurozone Zew survey also helped to lift the price. The single currency hit as high as 1.3934 versus the dollar after the release of U.S. housing data. However, euro retreated from there partly due to the statement from BRIC summit.

The British pound strengthened versus the greenback on high inflation data. In European session, U.K. CPI came in at 0.6% in May compared to the readings of 0.2% in April, boosting speculation that Bank of England will raise interest rates by the end of this year. Sterling hit an intra-day high of 1.6507 against the dollar in New York morning trade before retreating partly due to profit taking.

Earlier in the day, Bank of Japan left the target overnight lending rate at 0.1% and raised its view of the nation's economy for a second month. The dollar dropped versus the Japanese yen to as low as 96.08 before rebounding on short-covering.

Data to be released on Wednesday Australia Westpac leading index, Japan machine order, Switzerland industrial production, retail sales, U.K. BoE meeting minutes, ILO unemployment, eurozone trade balance, Canada leading indicators, U.S. CPI and current account.