The dollar dipped to a near 3-week low against the yen in thin year-end volume on Tuesday as investors favored riskier assets, led by renewed optimism about global growth.
The greenback was off 0.1 percent at 108.77 against the Japanese yen, on track for its third straight session of losses and within a whisker of Monday's 108.74, the weakest since Dec. 12.
The dollar index, which measures the currency against a basket of rivals, was flat at 96.728 in early Asian trade.
On Friday, the index had suffered its biggest one-day fall since March, which left its gains for the year at under 0.6 percent, compared with returns of 4.4 percent in 2018. It is now on track for the smallest rise since 2013.
Encouraging news on the Sino-US trade deal boosted risk sentiment in currency markets overnight.
The White House's trade adviser, Peter Navarro, on Monday said the US-China Phase 1 trade deal would likely be signed in the next week, but said confirmation would come from President Donald Trump or the US Trade Representative.
Increased optimism about US-China trade relations and an improved global growth outlook drove investors out of other safe-haven assets like Treasury bonds while the risk-sensitive Australian and New Zealand dollars jumped to five-month highs.
China's yuan strengthened a touch in the offshore market to 6.972 on Monday, its highest since Dec. 13. It was last at 6.9780.
Investor appetite for risk also helped drive the euro to a 4-1/2-month high of $1.121 on Monday. It was last up 0.1 percent at $1.1209. Signs that the euro zone economy may be stabilizing have lifted the single currency in recent weeks.
Sterling was last treading water at $1.3114 against the dollar after rising 2.8 percent so far this year. Concerns that Britain is headed for a disruptive "hard Brexit" at the end of 2020 have hurt the pound since mid-December.