The Yen mostly held on to gains from the previous session following results from a weekend upper house election in Japan that proved no worse than what had already been priced in, with focus now on how quickly Tokyo can strike a trade deal with Washington and Prime Minister Shigeru Ishiba's future at the helm.

The Japanese currency was last a touch weaker at 147.57 a dollar, after rising 1% on Monday in the wake of the election outcome.

The bruising defeat suffered by Ishiba and his ruling coalition also drew just a modest response in the broader Japanese market, which returned from a holiday.

"The initial relief for the yen that the ruling coalition did not lose even more seats and that Prime Minister Ishiba plans to hang on to power is likely to prove short lived," said MUFG Senior Currency analyst Lee Hardman.

"The pick-up in political uncertainty in Japan could complicate reaching a timely trade deal with the US, posing downside risks for Japan's economy and the Yen."

With just slightly more than a week to go before the August 1 deadline, US Treasury Secretary Scott Bessent said on Monday that the administration is more concerned with the quality of trade agreements than their timing.

Asked whether the deadline could be extended for countries engaged in productive talks with Washington, Bessent said President Donald Trump would make that decision.

Uncertainty over the eventual state of tariffs globally has been a huge overhang for the foreign exchange market, leaving currencies trading in a tight range for the most part, even as stocks on Wall Street have scaled fresh highs.

"Nothing that happens on August 1 is necessarily permanent, so long as the US administration remains willing to talk, as was indicated in Trump's letters from two weeks ago," said Thierry Wizman, global FX and Rates Strategist at Macquarie Group.

The Dollar was last steady after slipping in the previous session due in part to the Yen's rise and a dip in US Treasury yields, leaving sterling trading 0.13% lower at $1.3474.

The euro eased slightly to $1.1689, with focus also on a rate decision by the European Central Bank later this week, where expectations are for policymakers to stand pat on rates.

The European Union (EU) is exploring a broader set of possible counter measures against the United States as prospects for an acceptable trade agreement with Washington fade, according to EU diplomats.

--Reuters--