In Tuesday's New York foreign exchange session, the Bloomberg Dollar Spot Index erased its early gains, settling nearly unchanged. The Japanese yen weakened following reports that Japanese Prime Minister Sana Takaichi expressed concerns about further interest rate hikes by the Bank of Japan.

During the afternoon in New York, the dollar index was up less than 0.1%, after fluctuating between a 0.2% gain and a 0.1% loss during the day.

U.S. consumer confidence rose in February. Data released on Tuesday by The Conference Board showed the consumer confidence index increased to 91.2, up from a revised 89 the previous month.

According to preliminary estimates from ADP Research and the Stanford Digital Economy Lab, U.S. private sector employment grew by an average of 12,750 jobs per week in the four weeks ending February 7.

Elias Haddad, Global Head of Market Strategy at Brown Brothers Harriman, noted that the improvement in February's consumer confidence "exceeded expectations," allowing the Federal Reserve to remain patient before returning to policy easing.

Amid uncertainty surrounding U.S. tariff policy and heightened tensions between the U.S. and Iran, traders are focused on President Donald Trump’s State of the Union address scheduled for Tuesday evening.

The USD/JPY pair rose as much as 1.1%, reaching a two-week high of 156.28, before paring gains. The Daily News cited unnamed sources reporting that Prime Minister Takaichi took a "more assertive stance" during her meeting with Bank of Japan Governor Kazuo Ueda last week, compared to her position in November.

Goldman Sachs strategists Teresa Alves, Karen Reichgott Fishman, and Stuart Jenkins wrote, "If the Bank of Japan continues with a gradual approach to rate hikes, the increased likelihood of coordination between monetary and fiscal policy will continue to weigh on the yen."

The EUR/USD pair declined 0.1% to 1.1775.

An EU assessment suggested that President Trump’s new tariff policy could result in higher tariff rates on certain EU exports than those permitted under the U.S.-EU trade agreement.

The GBP/USD pair was largely flat near 1.3494.

The USD/CHF pair fell 0.1% to 0.7740.

Swiss National Bank Governor Martin Schlegel stated that the central bank is prepared to intervene in the foreign exchange market if necessary.