The dollar was hovering near a three-month low against a basket of currencies on Tuesday on the perception that the U.S. growth outlook is deteriorating, forcing the Federal Reserve to keep interest rates low.

The Australian dollar dropped after retail sales and building approvals data in Australia disappointed bulls ahead of a Reserve Bank of Australia policy announcement.

The Australian dollar fell 0.3 percent to $0.9090 AUD=D4, slipping 0.6 percent from a three-month peak of $0.9146 hit on Monday and it dropped 0.6 percent against the Japanese yen AUDJPY=R to 78.47 yen.

Traders are now looking to the RBA's policy announcement at 0430 GMT.

The market sees almost no chance of a hike in the 4.5 percent cash rate but suspects the bank will be upbeat on domestic and Asian outlooks and maybe more optimistic on Europe.

The euro stayed near a three-month high after having broken above a key Fibonacci retracement level, helped by improved risk appetite after decent manufacturing data from Europe.

The euro slipped 0.1 percent to $1.3165, but near a three-month high of $1.3196 hit on Monday, when stop-loss orders were triggered after it broke above $1.3125, a 38.2 percent Fibonacci retracement of its decline from November to June.

The currency's advance could be slowed by option barriers at $1.32 and $1.3250, although a break in those levels could open the way for it to reclaim $1.3510, a 50 percent retracement of its six-month fall to early June.

Against the yen, the euro slipped 0.1 percent to 113.70 yen EURJPY=R.

Investors' rising risk appetite could push up the pair beyond its 10-week peak of 114.74 yen hit last week, although there will be a resistance at 115 yen, where Japanese exporters are likely to place fresh sell orders, said a trader at a Japanese brokerage house.

The dollar index .DXY stood at 80.94, flat from late Monday but just above Monday's three-month low of 80.792.

A break below 80.723 would put it below its 200-day moving average for the first time since January and on course to test an April 14 low of 80.03.

The greenback has slid over the past month after a run of disappointing U.S. data fuelled expectations that U.S. growth could lose momentum as official stimulus is withdrawn.

The dollar slipped 0.1 percent against the Japanese yen to 86.43 yen JPY=, not far from an eight-month low of 85.95 yen hit late last week.

With interest rate differentials between the yen and dollar disappearing, dollar/yen is tending to be driven by Japanese exporters' flows, as we've seen in the past few sessions, said Daisuke Karakama, market economist at Mizuho Corporate Bank.

Japanese exporters have been selling the dollar as their summer holiday season approaches in mid-August.

Karakama noted that, while U.S. shares rose and long-dated U.S. bonds fell, the two-year U.S. bond yield showed only a marginal increase on Monday, suggesting limited upside for the dollar.

The two-year yield spread between Japanese and U.S. bonds has had a correlation of over 80 percent most of the time so far this year.

U.S. bond yields dipped in Asia, putting mild pressure on the dollar, after the Wall Street Journal reported the U.S. Federal Reserve will consider next week whether to use cash from its maturing mortgage bond holdings to buy new mortgage or Treasury bonds.

A break below the November low of 84.82 yen in the dollar/yen could trigger more market talk about Japanese intervention, though few market players expect the country's authorities to step in for now. [ID:nTOE672023] (Reporting by Hideyuki Sano; Editing by Joseph Radford)