Bullishness on the dollar after stronger-than-expected US gross domestic data last Friday overshadowed the continuing release of euro zone manufacturing Purchasing Managers Index (PMI) reports, which are leading indicators for the manufacturing industry.

The July PMI for France was kept near its June high amid sustained growth in new orders and record exports. Austria and Italy's main PMI indices ticked up in July from their June levels.

But analysts said dealers continued to focus on the prospects of a near-term interest rate hike in the US, which could come as early as the next US Federal Open Market Committee Meeting on August 22, keeping the dollar supported.

"New orders were up and exports were up. All in all it (the French PMI) looks like a solid report, but the PMI's track-record is not very long and they've never had much of a market impact in the past," said Michael Lewis, senior currency economist at Deutsche Bank in London.

"It's still a case of buoyant optimism for the dollar after the strong GDP report last week."

Further insight into the health of the European economy will come from euro zone PMI which is scheduled for release at 0800 GMT.

By 0720 GMT the euro was hovering around $0.9250, within a third of a cent of its Monday's low of $0.9217. Tame euro zone price reports released on Monday had dimmed the chances of more aggressive credit tightening by the European Central Bank in near term, bringing further pressure to bear on the currency.

Meanwhile the yen was aided by a 2.37 per cent bounce in Tokyo's Nikkei 225 stock average on Tuesday. But political and financial uncertainty in Japan capped its gains.

-- (Reuters)