The dollar is modestly stronger against the euro early in New York Tuesday despite a report showing economic expectations in Germany - the euro zone's largest economy - continued to strengthen. The Center for European Economic Research, also known as ZEW, said German business sentiment brightened further in May, buoyed by strong investment demand and a pickup in the labor market. But the rise was expected by economists, so potential investors in the single currency were not too impressed. Instead, the dollar remained well-bid on growing sentiment that the Federal Reserve may not cut interest rates this year, based on some solid U.S. economic data in recent weeks. The market is pricing out "the likelihood of a Fed rate cut this year, and it is this factor that appears to be the driving force at the moment," said Camilla Sutton, currency strategist at Scotia Capital in Toronto. There is little data for currency investors to focus on Tuesday, suggesting the dollar could remain in tight ranges throughout the New York session. A second-tier report on manufacturing activity in the Federal Reserve Bank of Richmond region will be released at 10 a.m. EDT. Meanwhile, the dollar is slightly higher against the yen as more gains in Asian equities overnight - including stock markets in Shanghai and Tokyo - have increased risk appetite, giving carry trade investors confidence to hold on to their bets. Carry trades are popular among short-term, or speculative, investors. They borrow yen at low interest rates to buy higher-yielding currencies, such as the dollar, and then pocket the difference in yield. Currency investors shrugged off the minutes from the Bank of Japan's latest policy meeting, released Tuesday. The minutes suggested the BOJ still has plans to hike rates again this year, despite low inflation. But this did not rattle investors, as an eventual hike to 0.75% from the current rate of 0.50% would not be much of a blow to carry trades. Still, the market seemed unwilling to ratchet up their carry trades Tuesday ahead of U.S.-China economic talks that begin in Washington Tuesday morning. The high-level talks will include Treasury Secretary Henry Paulson and members of Congress on the U.S. side, while the Chinese delegation will be led by Vice Prime Minister Wu Yi.