The Japanese yen, benefited from increased demand for safe haven assets as it firmed against the dollar on Tuesday, while the euro and sterling were weighed by concerns over Italy's budget spending and over British Prime Minister Theresa May's future with Brexit talks stalled.

The dollar weakened more than a quarter percent in Asian trade with USD/JPY slipping to 112.55.

Cable traded flat at 1.2960 on Tuesday, having dropped 0.83 percent on Monday, its steepest drop in percentage terms since Sept. 21. Sterling has lost 2.2 percent against the dollar in the last seven trading sessions.

With a little over five months until Britain is scheduled to exit the EU, Brexit talks have stalled, sparking speculation that May could be toppled by rebels in her Conservative Party.

EUR/USD eased slightly to 1.1453 on Tuesday, as doubts over Italy's free spending budget drove sentiment. The single currency failed to draw some respite from a drop in Italian 10-year bond yields on Monday. The benchmark Italian 1-year yield declined by 3 percent on Monday, its steepest fall in percentage terms since Oct. 3.

Moody's downgraded the Italian credit rating because of the government's spending plans on Friday but surprisingly kept the outlook stable.