The fresh bout of risk aversion had weighed particularly on the antipodean currencies - often used as liquid proxies for the Chinese yuan - with the Aussie sliding nearly 1% overnight. It last gained 0.12% to $0.6614.

The kiwi fell more than 0.8% and was last 0.15% higher at $0.6109.

China's capital warned on Monday that it was facing its most severe test of the COVID-19 pandemic, with a surge in COVID cases sparking fresh restriction measures. Deaths from the virus were also recorded in Beijing for the first time since late May.

The offshore yuan traded 0.1% higher at 7.1665 per dollar in early Asia trade on Tuesday, after falling more than 0.7% overnight.

"The safe haven appeal of the U.S. dollar is coming back into vogue as the concerns around China and the outbreaks from COVID are keeping markets nervous," said Rodrigo Catril, a currency strategist at National Australia Bank (NAB).

The Japanese yen slumped more than 1% to the weaker side of 142 per dollar overnight and last traded 142.01.

"The curiosity is how Japan has also shown a great deal of sensitivity ... if anything, the takeaway there is that Japan's safe haven appeal is no longer there," said NAB's Catril, referring to the yen. "It's more like a cork in the ocean, subject to risk aversion as well as movements in 10-year Treasury yields."

U.S. Treasury yields across most maturities inched higher overnight, as investors continued to re-price expectations for how high the Federal Reserve will hike rates as it attempts to bring inflation down from close to 40-year highs.

The benchmark 10-year Treasury yield eked out a marginal gain overnight and last stood at 3.825%. 

The euro was up 0.09% at $1.0250, nursing some of its 0.8% overnight loss, while sterling gained 0.24% to $1.1843, after falling more than 0.5% overnight.

The U.S. dollar index was last 0.06% lower at 107.71. It had risen close to 0.8% overnight, the largest daily gain since Nov. 3.

Speeches delivered by Fed speakers overnight delivered few surprises, with Cleveland Fed President Loretta Mester saying the central bank can downshift to smaller interest rate hike increments from next month.

San Francisco Fed President Mary Daly said the real-world impact of interest rate hikes is likely greater than what its short-term rate target implies.

"Fed comments remained in line with the recent slant of rhetoric," said economists at ING in a note.