In mid-day Asian trade, the greenback was higher against the euro, with EUR/USD falling 0.22% to hit 1.4409.
A batch of U.S. economic news released Tuesday served to heighten expectations for the Federal Reserve's meeting in Jackson Hole, Wyoming, where investors are pinning hopes on a new round of quantitative easing from the U.S. Central Bank.
The U.S. Census Bureau reported that new home sales dropped more than expected in July, falling 0.7% to a seasonally adjusted annual rate of 298,000. Economist's forecasts were for a 1% gain in July to 310,000.
It was the third straight month the figure declined and slowest growth rate since February.
In a separate report, the Richmond Federal Reserve Bank said its manufacturing index slumped to minus 10 in August from minus 1 in July, the lowest monthly rating since June of 2009. Forecasts were for the figure to fall to minus 7 for the month.
Wall Street shares rallied for a second straight day, with the Dow Jones Industrial Average closing up 3%, the Nasdaq Composite Index rose 4.3%, and the S&P 500 gained 3.4%.
Federal Reserve officials said two weeks ago that the economy faced increased risk and that they were "prepared to employ" more tools "as appropriate." The Fed has already completed two rounds of asset purchases referred to as quantitative easing.
Meanwhile, the greenback was up against the British pound, with GBP/USD slipping 0.07% to 1.6484.
The dollar gained ground against both the yen and the Swiss franc with USD/JPY adding 0.08% to hit 76.72, and USD/CHF higher by 0.12% to hit 0.7932.
The greenback was higher against its Canadian, Australian and New Zealand counterparts with USD/CAD up 0.16% to hit 0.9888, AUD/USD lower by 0.38% to hit 1.0486, and NZD/USD falling 0.92% to hit 0.8284.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.16% at 73.99.
Fed Chairman Ben Bernanke was scheduled to deliver a speech at the Jackson Hole meeting on Friday.
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