By Dion Rabouin
NEW YORK (Reuters) - The dollar turned broadly lower on Tuesday, moving in line with declining U.S. 10-year Treasury yields and consolidating gains from Monday in light trading ahead of Thursday's Thanksgiving holiday in the United States.
With limited data this week and the release of minutes from the Federal Reserve's November meeting and a speech from Fed Chair Janet Yellen expected over the next 24 hours, analysts said investors were seeking to even their books after broad dollar strength the previous session.
"It's just a lot of consolidation in the market," said Kathy Lien, managing director at BK Asset Management. "The dollar is just marking its time."
The euro steadied and was little changed after registering its biggest one-day fall in a month on Monday as investors looked beyond Germany's political impasse to focus on the euro zone's still-robust economy.
"The worst-case scenario is that the German political process will take a little more time to resolve, but markets are not expecting anything extraordinary to come out of this and the bigger picture is that the economy is performing well," said Commerzbank currency strategist Esther Reichelt in Frankfurt.
Germany's Chancellor Angela Merkel raised the prospect on Monday of a new election after talks on forming a three-way coalition collapsed.
The single currency
The dollar fell 0.25 percent against the yen
The move reflected the strong correlation the currency pairs have had with 10-year Treasury notes more than a prevailing sense of risk aversion, said Marc Chandler, chief global currency strategist at Brown Brothers Harriman & Co.
The 10-year note was yielding 2.35 percent, down 2 basis points from its Monday afternoon levels
"I'm not sure we needed a fresh reason to take the 10-year down," Chandler said. "It's more of an issue of why should we be looking for dramatically higher yields? Growth in the U.S. is firm and continues to be above trend, but with no real inflation to speak of."
The dollar index, which tracks the greenback against a basket of six major rivals, fell 0.1 percent to 93.971 (.DXY), but was still within sight of its overnight peak of 94.104, its highest since Nov. 14.
(Reporting by Saikat Chatterjee; Editing by Andrew Heavens and Jonathan Oatis)