The buck touched a fresh 15-year low versus the yen as renewed jitters about Europe's banking system led to increased risk aversion.

Traders shrugged off another tepid effort by the Bank of Japan to address the rapid ascent of the yen and bolster the world's third largest economy.

The dollar hit Y83.50 versus the yen, extending its lowest levels since 1995. Its previous 15-year low was 83.58, set back in August.

The Bank of Japan maintained its key interest rate at near-zero at the end of its two-day policy meeting on Tuesday. The markets yawned as the BoJ promised to take more policy actions to kick start the deflation-ravaged economy, if necessary.

While the yen is the most fashionable rainy-day currency, the dollar has maintained some of its safe haven appeal compared to the euro and sterling.

The buck rallied to a weekly high of $1.2700 versus the euro, picking up more two cents from Friday's level above $1.2915. Markets in the US were closed Monday for Labor Day.

Germany's factory orders declined 2.2% in July from the prior month, the Federal Ministry of Economics and Technology said on Tuesday. It was the its biggest fall in factory orders since February 2009. Economists were expecting factory orders to rise 0.5%.

Against the sterling, the dollar hit a monthly high of $1.5286, having pared a fraction of its steep early-summer losses.

British housing and manufacturing data is due out later this week, along with the latest interest rate decision from the Bank of England. Policy makers are expected to stand pat on rates and their quantitative easing programme.

With little first-tier economic data on the way from the US this week, focus turns to the Federal Reserve for tomorrow's release of the Beige Book, a collection of anecdotal information on current economic conditions.

Also tomorrow, President Barack Obama is expected to roll out new tax breaks for small businesses in an effort to jump-start the sluggish economy.