The dollar was mostly lower Tuesday as markets awaited a meeting of the U.S. Federal Reserve later in the day. The euro bought $1.3175 in European trading, up from $1.3173 in New York late Monday. The dollar bought 104.92 Japanese yen from 105.04 yen, and the British pound advanced to $1.8985 from $1.8970.
At its meeting later Tuesday, the Fed was widely expected to raise its benchmark federal-funds rate by a quarter-point to 2.75 percent. The hike would be the seventh interest-rate increase since the central bank began raising rates last June.
Higher interest rates usually boost a currency by making assets denominated in that currency more attractive to investors.
Investors also were focusing on whether the Fed continues to say it will raise borrowing costs at a "measured" pace or signals that it is prepared to raise rates more quickly.
The dollar had edged higher in earlier Asian trading Tuesday.
Still, some traders remained unconvinced about the dollar's long-term prospects, even as a weekend agreement by European Union finance ministers to relax the terms of the so-called Stability and Growth Pact weighed on the euro.
"I doubt the dollar's overnight rise had anything to do with Fed policy or the EU agreement," said Masamichi Koike, head of foreign exchange spot trading at Sumitomo Mitsui Banking.
Koike said the dollar's rise was due to traders covering their short dollar positions.
"The dollar will gradually start to fall again due to U.S. structural woes," he said. Worries over the U.S. trade and budget deficits pushed the euro to an all-time high of $1.3667 at the end of last year.