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By Jessica DiNapoli and Elizabeth Howcroft
NEW YORK (Reuters) - The dollar index rose against a basket of most major currencies on Tuesday, surpassing a two-week high, while yields on U.S. Treasuries slipped as U.S. Federal Reserve Chair Jerome Powell told Congress inflation will not get out of hand.
The dollar index was last up 0.65% at 91.8, reversing course from Monday when it dipped but hovered below four-month highs, as investors sought safe havens.
Yields on U.S. Treasuries also slipped again, at 1.624%. Earlier Tuesday, the Treasury drew solid demand for two-year notes, with investors looking ahead to auctions for longer-dated notes later in the week.
"It’s more about the fundamentals," said Juan Perez, a currency trader and strategist at Tempus Inc. "(We) have a ton of data to digest starting tomorrow."
Perez said the dollar's rise on Tuesday shows "ultimately we're just not out of this thing," referring to the COVID-19 pandemic.
The dollar index has gained around 2.4% so far in 2021 as investors see the relatively quick rollout of COVID-19 vaccines and stimulus spending in the United States as boosting economic growth.
But there was a wary tone in global markets, with most U.S. stocks tumbling on Tuesday.
Contributing to market caution was a third wave of the COVID-19 pandemic in Europe. Germany is extending its lockdown and urging citizens to stay at home over the Easter holidays.
Euro-dollar was down 0.71% at $1.1847.
The New Zealand dollar fell on new measures to cool the housing market, dropping to a three-month low against the U.S. dollar.
It was down about 2.27% on the day at 0.70.
The drop was triggered by the New Zealand government introducing measures to curb speculation on its red-hot housing market, where house prices have risen 23% in 12 months. The Australian dollar - considered a liquid proxy for risk - also took a hit and was down 1.54% at 0.763 versus the U.S. dollar.
Turkey's lira stabilized somewhat, having plunged 7.5% on Monday after President Tayyip Erdogan sacked the hawkish central bank chief. It was up around 1.79% against the U.S. dollar.
(Graphic: Turkey Lira, https://fingfx.thomsonreuters.com/gfx/mkt/yzdvxeaenpx/Turkey%20Lira.JPG)
Currency bid prices at 4:02PM (2002 GMT)
(Reporting by Jessica DiNapoli, Elizabeth Howcroft. Editing by Larry King and Mark Potter)