The Dollar is being hemmed in by the Federal Reserve's caution over the economy and as US lawmakers came closer to passing a bill expected to widen the nation's fiscal deficit. 

The greenback sold off broadly on Monday following last week's downgrade of the US sovereign rating by Moody's on deficit concerns. 

Now attention turns to a critical vote in Washington over US President Donald Trump's sweeping tax cuts. 

The Australian dollar held most of its gains ahead of the Reserve Bank of Australia’s decision later Tuesday, when it is widely expected to cut interest rates by 25 basis points.  

On Monday the Central Bank may only be able to cut interest rates by a quarter point over the rest of the year given concerns about rising inflation stoked by higher import taxes. 

Trump is expected to join the congressional debate over his tax bill on Tuesday. 

The vote comes after Moody’s stripped the US government of its top-tier credit rating, citing concerns over the nation’s growing $36.2 trillion debt pile. 

--Reuters--