Dollar weakens: The dollar showed signs of weakness on Tuesday as markets anticipated a week of crucial US economic data, offering insights into the Federal Reserve's potential interest rate adjustments.

Bitcoin, the leading cryptocurrency, surged to a more than two-year high, surpassing $57,000, following an announcement by enterprise software firm MicroStrategy Inc about its acquisition of approximately 3,000 additional tokens for $155 million.

The US dollar index, which gauges the currency against a basket of counterparts including the euro and yen, remained steady at 103.77 during Asian trading hours, after a 0.17 per cent decline on Monday.

Market expectations have discounted the possibility of a rate cut at the Fed's March meeting, shifting the anticipated timeline for a cut from May to June, according to CME's FedWatch Tool, driven by robust US consumer and producer price data.

Later on Tuesday, investors await US durable goods data, while Thursday will see the release of January's US personal consumption expenditures price index, the Fed's preferred inflation gauge.

Richard Franulovich, Westpac's head of FX strategy, noted the dollar's recent softness and highlighted upcoming event risks that could drive further movements in the currency.

The dollar slipped against the yen, reaching 150.485 yen, as Japan's currency strengthened following data indicating that consumer inflation remained at the Bank of Japan's 2 per cent target, defying forecasts of a decline.

The euro maintained its position at $1.08505, following a 0.27 per cent increase in the previous session.

Bitcoin's value rose by 3.3 per cent to $56,338, reaching $57,055 earlier, marking its highest level since December 2021.

Meanwhile, risk-sensitive currencies like the Australian dollar and New Zealand dollar faced downward pressure amid a decline in regional equities, retracting from recent multi-week highs.

The Australian dollar lost 0.2 per cent to $0.6528 after hitting a three-week peak at $0.6595, while the New Zealand dollar eased 0.3 per cent to $0.61555, touching its highest point since January 15 at $0.6218 on Thursday.

Traders are preparing for a crucial policy meeting by the Reserve Bank of New Zealand (RBNZ) on Wednesday, with markets pricing in a one-in-three chance of the RBNZ raising its official cash rate to combat persistent inflation.

(With Reuters Inputs)