The report was denied by Kuwait, but the European single currency rose to US$1.4729 from US$1.4648 late in New York on Monday.

Against the Japanese currency, the dollar slid to 89.06 yen from 89.51 yen on Monday.

Britain's Independent newspaper reported on its website on Tuesday that Gulf countries have held secret meetings with officials outside the region to discuss dropping the dollar for oil trade.

The countries would instead use a basket of currencies, including the yen, the paper said, citing Gulf Arab and Chinese banking sources in Hong Kong.

The report increased recent negative sentiment toward the dollar, dealers said.

“The timing made it easier to sell the dollar on the news,” Yuzo Sakai, manager at brokerage Tokyo Forex & Ueda Harlow, told Dow Jones Newswires.

“There has been similar talk before but this comes as concern over the dollar's place in the world is increasing,” Sakai said.

The dollar also dropped after a top U.S. central banker said that interest rates in the world's biggest economy were likely to remain very low for some time.

“The federal funds rate target is likely to remain exceptionally low for an extended period” amid weak inflation and a modest economic rebound, Federal Reserve Bank of New York president William Dudley said.

“The trend is for a weak dollar as the market is convinced that U.S. rates won't rise any time soon,” said Yuji Saito, head of foreign exchange at Societe Generale in Tokyo.

The Australian dollar jumped after the Reserve Bank of Australia announced it was raising its official interest rates to 3.25 percent, from a 49-year-low of 3.0 percent.

Australia is the first advanced economy to raise interest rates since the global financial crisis. Investors generally prefer the currencies of countries offering higher yields.

In London on Tuesday, the euro was changing hands at US$1.4729 against US$1.4648 late on Monday, at 131.14 yen (131.12), 0.9225 pounds (0.9193) and 1.5114 Swiss francs (1.5119).

The dollar stood at 89.06 yen (89.51) and 1.0264 Swiss francs (1.0320).

The pound was at US$1.5964 (1.5934).

On the London Bullion Market, the price of gold jumped to 1,019.65 dollars an ounce from 1,005.50 dollars an ounce late on Tuesday.

Hong Kong gold prices closed higher on Tuesday at US$1,019.00-US$1,020.00 an ounce, up from Monday's close of US$1,005.00-US$1,006.00.

It opened at US$1,018.50-US$1,019.50.

The dollar fell in Asia Tuesday, hit by the prospect U.S. interest rates will stay low for some time and a media report that Gulf states are planning to stop using the greenback for oil transactions.

The dollar dropped to 88.86 yen in Tokyo afternoon trade, down from 89.51 yen in New York late Monday. The euro rose to 1.4743 dollars from 1.4648 while edging down to 131.02 yen from 131.12.

Britain's Independent newspaper reported on its Web site Tuesday that Gulf countries have held secret meetings with officials outside the region to discuss dropping the dollar for oil trade.

The countries would instead use a basket of currencies, including the yen, the paper said, citing Gulf Arab and Chinese banking sources in Hong Kong.

The report increased recent negative sentiment toward the dollar, dealers said.

“The timing made it easier to sell the dollar on the news,” Yuzo Sakai, manager at brokerage Tokyo Forex & Ueda Harlow, told Dow Jones Newswires.

“There has been similar talk before but this comes as concern over the dollar's place in the world is increasing,” Sakai said.

The dollar also dropped after a top U.S. central banker said that interest rates in the world's largest economy were likely to remain very low for some time.

“The federal funds rate target is likely to remain exceptionally low for an extended period” amid weak inflation and a modest economic rebound, Federal Reserve Bank of New York president William Dudley said.

“The trend is for a weak dollar as the market is convinced that U.S. rates won't rise any time soon,” said Yuji Saito, head of forex at Societe Generale in Tokyo.

The Australian dollar jumped after the Reserve Bank of Australia announced it was hiking its official interest rates to 3.25 percent, from a 49-year-low of 3.0 percent.

Australia is the first advanced economy to raise interest rates since the global financial crisis.