Rising concerns in China over the country's severe pandemic measures sent investors to the dollar, causing the Aussie, Kiwi, and sterling to fall more than 1% overnight. The dollar maintained its overnight gains on Tuesday (Nov. 29), as concerns about unrest in China over COVID-19 limitations impacted market mood, while hawkish words from Federal Reserve officials offered the greenback a boost.

Christine Lagarde, President of the European Central Bank, stated overnight that eurozone inflation has not peaked and may be higher than currently projected, implying a series of interest rate hikes ahead. The euro, which jumped to a five-month high of US$1.05 overnight, ultimately reversed those gains as the U.S. dollar recovered. It was last slightly lower at $1.03.

The eurozone's November flash inflation numbers are coming on Wednesday, with economists surveyed by Reuters predicting inflation to reach 10.4% year on year. Inflation figures from Spain and Germany are anticipated later on Tuesday.

"I think the currency moves today will again be driven by views on China's COVID policy, as well as the broad risk sentiment," Carol Kong, a currency strategist at the Commonwealth Bank of Australia said.

Market sentiment remained cautious in early Asia trade on Tuesday, with the Australian dollar still nursing some of its overnight 1.5% drop. It was last up 0.02% at $0.67. The New Zealand dollar increased 0.19 %o $0.62, while the sterling increased 0.07% to $1.20.

After increasing by 0.5% overnight, the U.S. dollar index was slightly down by 0.1% at 106.50 when measured against a basket of currencies. After St. Louis Fed President James Bullard stated overnight that the Fed needed to hike interest rates quite a bit more, the dollar had extended gains.

John Williams, president of the New York Fed, agreed that the US central bank must continue raising rates, but he did not specify how quickly or how much it will need to raise the cost of short-term borrowing.

The offshore yuan was around 0.4% higher at $7.21 per dollar, having partially recovered from its losses in the previous session. The Japanese yen last exchanged hands at 139.04 to the dollar.

Following the failure of the FTX exchange earlier this month, cryptocurrency lender BlockFi filed for Chapter 11 bankruptcy protection, which caused Bitcoin's overnight losses to increase. The price of the coin last traded down 0.3% to 16167. On Monday, it dropped 1.3% and had its worst day in almost a week.