The dollar remained on the defensive versus the resurgent sterling but was steady against most other majors Tuesday morning in New York. With the Dow Jones Industrial Average at its highest level in more than a month, higher-yielding currencies have seen renewed buying interest.

While there are no major economic reports due to be released Tuesday, it will be a busy day on Capitol Hill. Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner will appear before a House Financial Services Committee hearing on the government's role in saving AIG, which has been propped up to the tune of nearly $200 billion dollars in taxpayer money.

The AIG hearing is set to kick off at 10 am ET, the same time that FDIC head Sheila Bair will testify at a Senate Banking Committee hearing on bank regulation.

Trading could also be impacted by comments from Chicago Federal Reserve Bank President Charles Evans.

The dollar continued to drift lower versus the sterling, slipping to a month and half low of 1.4777. With the loss, the dollar moved further away from a 23-year high of 1.3501, set in January.

Tuesday, the Office for National Statistics said UK's annual inflation accelerated to 3.2% in February from 3% in January. Economists had expected consumer price inflation to slow to 2.6%. Month-on-month, consumer prices were up 0.9%, faster than a 0.3% rise expected by economists.

The dollar firmed up a bit versus the euro Tuesday morning, rising slightly to 1.3545. On Monday, the dollar hit a 10-week low of of 1.3735, but has since been steady.

The Eurozone recorded a current account deficit of EUR12.7 billion in January, on a seasonal and working day adjusted basis, larger than a deficit of EUR7.6 billion in December, a report by the European Central Bank said Tuesday.

The dollar extended its gains from the previous session versus the yen, making its way back toward the elusive 100 mark. The buck rose to 98.50, having pared most of its steep losses from last week.

The board members of the Bank of Japan suggested that the Japanese economy may begin to recover from the current recession in the second half of this year at the earliest, minutes from the February 18 and 19 monetary policy meeting revealed on Tuesday.

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