In London trade, the European single currency eased to 1.3939 dollars from 1.3942 dollars late in New York on Monday.

Against the Japanese currency, the dollar rose to 81.39 yen from 81.21 on Monday.

German investor confidence fell further in October, as finance experts expected Europe's biggest economy to tread water in the coming six months, the ZEW economic research institute said on Tuesday.

The ZEW economic expectations indicator, based on a survey of 282 analysts and institutional investors, fell to minus 7.2 points from minus 4.3 points in September, its sixth consecutive monthly drop to the lowest level in 21 months.

"More than half of the financial market experts expect no change of the economic situation in Germany within the next half year," a statement said.

The shared eurozone unit had started falling in New York after US Treasury Secretary Timothy Geithner said Washington would not try to push down the greenback for trade advantage.

Currencies looks set to be a major topic at the gathering in South Korea on October 22-23 of G20 finance ministers in preparation for a summit by world leaders next month.

"Investors are not seeing much incentive for today either to buy or sell the dollar," said Masatsugu Miyata, forex dealer at Hachijuni Bank.

Meanwhile the World Bank on Tuesday said that a stronger yuan exchange rate was in China's interests and would help the country rein in inflation and boost domestic consumption.

"I think real appreciation of the renminbi is something that is probably in China's interests for many reasons," the bank's lead economist for China, Ardo Hansson, said at the launch of a report on developing East Asian economies.

The World Bank report comes as China, the world's biggest exporter and second-largest economy, faces growing pressure from major trading partners to let its currency appreciate at a faster rate against the dollar.

Elsewhere, the British pound fell against the euro and dollar as the coalition government prepared to announce huge cuts to public spending on Wednesday.

In London, the euro changed hands at 1.3939 dollars against 1.3942 dollars late in New York on Monday, at 113.31 yen (113.20), 0.8784 pounds (0.8778) and 1.3365 Swiss francs (1.3371).

The dollar stood at 81.39 yen (81.21) and 0.9601 Swiss francs (0.9587).

The pound was at 1.5846 dollars (1.5878).

On the London Bullion Market, the price of gold rose to 1,369 dollars an ounce from 1,367.25 dollars an ounce late on Monday.