The Japanese yen fell against the dollar and euro after the European Central Bank added a record $500 billion (348.6 billion euros) for two weeks at 4.21% to the banking system, almost 170 billion euros more than it estimated was needed. Short-term borrowing costs tumbled after the ECB's injection and the Federal Reserve's auction of $20 billion on Monday. The Bank of England held the first of two special operations on Tuesday, offering 10 billion pounds ($20 billion) of cash for three months.

The greenback and euro rose against the Japanese yen from 112.75 to 113.54 and from 162.40 to 163.63 respectively. The single currency rebounded versus the dollar from 1.4366 to 1.4436 and then traded sideways inside the established range. U.S. currency rebounded against the Swiss franc from 1.1485 to 1.1535. The British pound weakened from 2.0226 to 2.0110 after the release of soft U.K. inflation data. The U.K. core CPI fell to 1.4% y/y in November, les than the expectation of 1.6%.

On the data front, U.S. building permits declined by 1.5% to 1.152 million in November versus the 1.170 million in October. U.S. housing starts came in at 1.187 million homes at an annual rate, down from 1.232 million in October.

Investors are also awaiting Wednesday's results of this week's liquidity injection plans by top central banks. The Bank of Japan is expected to keep its benchmark lending rate at 0.5%, the lowest among industrialized nations, at its two-day monetary policy meeting starting on Wednesday.

Wednesday will see the release of Japan’s all industry index, German PPI and Ifo index and the Bank of England MPC vote outcome.