The dollar was around 1.4725 in early Europe on Tuesday with higher-yield currencies seen as more attractive. The dollar briefly tested support levels close to 1.4750 before regaining ground and pushing back through the 1.47 level.

There will be further caution ahead of Tuesday's Federal Reserve decision with residual speculation that the Fed could cut by 0.50% to help protect the economy. In this environment, the US currency should gain some relief if policy action is limited to a 0.25% rate cut and this looks the most likely outcome. The statement will also very important for confidence with a firm stance required to provide dollar support. There is a very small chance that rates will be left unchanged.

US pending home sales rose 0.6% for October after a revised 1.4% increase previously which will maintain some hopes that the sector will be able to stabilise and should ease immediate pressure for more aggressive Fed action.

There will still be pressure for a 0.50% cut in the discount rate to help ease the serious credit market stresses.