The euro slipped lower on Tuesday after falling from last week's high as forex investors grew increasingly cautious following a months-long rally. The dollar firmed against the yen though a lack of catalysts cooled its strength.

EUR/USD fell to 1.1932 after sliding 0.5 percent on Monday, its largest daily drop since late October.

Market participants said a correction was inevitable for the common currency after it rallied to near its 2017 peak of 1.2092 over the last few months, lifted by signs of acceleration in the euro zone economy.

Speculators' net long position in the euro/dollar futures in Chicago reached a record high last week, data from U.S. financial watchdog showed on Friday, pointing to potential for profit-taking.

Even though many Federal Reserve policymakers have said they expect three rate hikes this year, forex traders are not entirely convinced as inflation remains tame despite very tight labour market conditions.

These doubts have weighed on the greenback, with the dollar index down near its lowest levels since 2015 during the past few months.

USD/JPY remains resilient however, near 113, having risen to 113.40 on Monday, its highest level in about a half month, spurred by upbeat risk sentiment.

December’s high of 113.75 is seen as the next target level but many traders believe more catalysts are needed for a test of the 114 handle.