NEW YORK (CNNMoney.com) -- The dollar was trading in a tight range Tuesday after the Reserve Bank of Australia surprised investors by voting to hold interest rates steady.
What prices are doing: The dollar was flat against the euro at $1.3936. It was also unchanged against the U.K pound at $1.5944 and the Japanese yen at ¥90.53.
What's moving the market: The Australia dollar fell more than 1% against the U.S. dollar after the Australian central bank left rates unchanged at 3.75%. Analysts had expected a 0.25% increase.
The move raised concerns that the global economic recovery may not be a strong as previously expected and boosted demand for safe-haven assets. It was also seen as a response to steps Chinese policy makers have taken recently to rollback some economic stimulus efforts.
But the Aussie recovered later in the session as stock prices in Europe rose. Asian markets closed mostly higher, with Japan's Nikkei gaining 1.6%.
"As risk appetite improved, there was some increase in Euro demand and dollar sentiment was undermined to some extent by fears over the budget situation," analysts at Sucden Financial wrote in a research note.
President Obama unveiled a $3.8 trillion budget for 2011 Monday that assumes the nation's unemployment rate will average 9.2% in 2011 and that U.S. gross domestic product will grow by 3.8% next year.
The budget highlighted the challenges facing the administration as it seeks to boost the fragile economic recovery while controlling the nation's deficit.
Meanwhile, the euro found some support as concerns about Greece's debt woes were temporarily subdued. But analysts said the outlook for the Euro Zone economy remains cloudy.
In the United States, traders will look to reports on U.S. auto sales, which are due out later Tuesday. A reading on pending home sales also is on tap.
Later in the week, the Labor Department will release its closely watched monthly jobs report.
What analysts are saying: "The greenback seems to be at least temporarily halting its current leg higher," said Sacha Tihanyi, currency strategist at Scotia Capital. "The strong negative correlation between equities and the U.S. dollar has reestablished itself."
The greenback had been steadily regaining ground in January as improved U.S. economic data raised optimism about the nation's gradual recovery. But the dollar, considered a safe haven, remains vulnerable as investors appear to have regained their appetite for risk.
