The dollar sagged against the yen on Tuesday as investors took profit after its recent rally, while the kiwi was dented by bets New Zealand's central bank could cut interest rates next month.

The New Zealand dollar was one of the big movers in Asian trade, with the kiwi falling sharply after the Reserve Bank of New Zealand stepped up efforts to impose fresh curbs on a hot housing market - a move seen as raising the chance of a rate cut.

The kiwi hit a three-week low of $0.7014, and was last trading at $0.7033, down 1.2 per cent on the day.

The US dollar retreated after hitting a 3-1/2-week high of 106.33 yen at one point on Tuesday, marking a gain of more than 6 per cent from its July 8 low of 99.99 yen.

The greenback rallied from that trough as the yen buckled under growing expectations of monetary easing by the Bank of Japan, a broad recovery in risk appetite and speculation about M&A-related yen-selling.

Some investors are now booking profits in the dollar, following its hefty gains versus the yen, said a trader for a Japanese bank in Singapore.

"There seems to be some sporadic profit-taking by overseas (non-Japanese) players," the trader said.

The dollar eased 0.4 per cent to 105.79 yen, after hitting 106.33 yen, the greenback's highest level since June 24.

The greenback now faces resistance at the 55-day moving average of 106.33 yen, but a break of that level could prompt traders to test its June 24 high of 106.875.

Speculators have been betting that the Bank of Japan will further ease policy at its July 28-29 meeting, as the government prepares new fiscal stimulus to boost the economy.

Traders are also unwinding their safe-haven bids in the yen as the initial shocks from last month's vote by Britain to leave the European Union ebb, with US shares hitting record highs partly because Brexit has helped to quash expectations of near-term rate increases by the US Federal Reserve.

Some traders were also expecting yen selling from Softbank, which will buy Britain's most valuable technology company ARM for $32 billion in cash.

The British pound last stood at 140.08 yen, down 0.5 per cent on the day. Sterling has recovered nearly 9 per cent from the 3-1/2-year low of 129.05 yen hit in the wake of Britain's EU referendum.

Against the dollar, the pound eased 0.3 per cent to $1.3221.

The euro stood little changed at $1.1077 ahead of the European Central Bank's policy meeting on Thursday.

The dollar index has found reasonable support but lacked momentum to test its four-month high marked last week.

The index stood at 96.547, below its July 11 high of 96.793.

"Although US payrolls data published earlier this month was pretty strong, some US data released after the British referendum shows some weakness. The markets will be looking to upcoming data to see if the strength of the payrolls data will be sustainable," said Shinichiro Kadota, chief FX strategist at Barclays Securities Japan.

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