LONDON (MarketWatch) -- The U.S. dollar was mostly lower versus major rivals Tuesday, with the euro largely shrugging off early weakness tied to Moody's downgrade of Greece to junk status late the previous day. The U.S. unit lost ground after U.S. economic data. The New York Federal Reserve Bank's Empire State Manufacturing Index edged higher to 19.6 in June from 19.1 in May, remaining in growth territory but off the high of 31.9 in April. Also, the Labor Department said import prices fell 0.6% in May, partly reversing an upwardly revised 1.1% gain in April. The multi-notch downgrade served to undercut investor appetite for risk, paring euro gains on Monday and leaving the single currency and other assets seen as a proxy for risk under pressure. The euro also managed to push higher despite an unexpectedly sharp drop in a gauge of German investor confidence. The ZEW economic sentiment indicator fell to 28.7 points in June, down from 45.8 in May. Economists had forecast a more modest decline to 42.5. Read about the June ZEW index. The euro (CUR_EURUSD 1.2268, +0.0057, +0.4668%) edged higher to trade at $1.2272, up from $1.2249 in North American trade late Monday. "At least the worst pessimism regarding the joint currency seems to have abated," wrote strategists at Commerzbank in Frankfurt, referring to the euro's ability to hold gains. But Geoffrey Yu, currency strategist at UBS, said the outlook for the euro remains bearish amid little sign the euro zone's ongoing debt crisis will be resolved any time soon, along with expectations austerity measures will drag on future growth. "We continue to forecast euro/U.S. dollar at $1.15 in three months," he said. The dollar index (DXY 86.34, -0.17, -0.20%) , which measures the greenback against a trade-weighted basket of major currencies, fell to 86.481, down from 86.513 on Monday. The dollar fell versus the Japanese yen to buy ¥91.26, down from ¥91.52. The Bank of Japan said Tuesday it would offer financial institutions up to 3 trillion yen ($32.8 billion) in new lending, while also leaving its key policy rate unchanged, as widely expected. Read about the Bank of Japan. The British pound saw a rebound versus the dollar cut short to trade at $1.4751, down from $1.4766 on Monday. Sterling initially dipped after data showed May consumer price inflation slowed more than expected to 3.4% from 3.7% in April. Economists had forecast a reading of 3.5%. Read about U.K. inflation data. The slowdown undercut ideas that the Bank of England could be forced to move rates higher by the end of the year, said Jane Foley, research director at Forex.com. That said, inflation remains well above the BOE's target of 2% and the debate over how quickly inflation pressures will fade is expected to continue, she said.

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