The dollar traded little changed against the euro and a major currency basket on Tuesday, paring some of its earlier gains due to data showing U.S. consumer confidence fell to its lowest in two years.

The report has enhanced expectations of a quarter-point interest rate easing by the Federal Reserve on Wednesday. The dollar had earlier rebounded from the previous day's record lows after a Wall Street Journal report raised doubts about a widely expected U.S. rate cut this week.

I think what you had overnight was dollar buying on the back of the Greg Ip article that said the market is overly optimistic about future Fed rate cuts, said Adam Fazio, currency strategist, at CIBC World Markets in New York.

Now you're starting to see positions put back on...where (investors) are buying euros and generally just selling the dollar....Now the status quo is coming back as we got a confidence number that's the lowest since late 2005, he added,

The Conference Board's index of consumer sentiment fell to 95.6 this month, the lowest since October 2005, from a revised 99.5 in September. Markets were expecting an index of 99.0.

The euro hit the day's highs against the dollar at $1.4427 following the consumer confidence report, according to Reuters data. It last traded at $1.4420. flat on the day.

The dollar's trade-weighted index against six major currencies was also little changed at 76.827. on Monday, it slid to 76.777, the lowest in the index's history of more than 30 years.

The dollar also fell to a two-and-a-half year low versus the Swiss franc to 1.1599 francs after the U.S. data.

Futures showed a 94 percent perceived chance that the Federal Reserve will cut benchmark rates this week against 98 percent on Monday and as low as 80 percent earlier in the day.

(Additional reporting by Steven C. Johnson)