The dollar languished on Tuesday after being beaten back from a two-decade high versus major peers by a reinvigorated euro.

The tables turned for the two currencies as traders began ramping up bets for a super-sized 75 basis-point rate hike by the European Central Bank, while paring the odds for one by the U.S. Federal Reserve.

The dollar index - which measures the greenback against a basket of six currencies, with the euro the most heavily weighted - stood at 108.65 at the start of the Asian day, after dropping back from 109.48 overnight, a level not seen since September 2002.

The euro edged 0.08% higher to $1.00045, extending Monday's 0.32% rally - which was its biggest in almost three weeks - after failing to keep its head above parity for the past week.

"The euro has found some stability near parity with help from reports that a 75bp hike could be on the cards at the September ECB meeting," said Sean Callow, a currency strategist at Westpac in Sydney.

"But the euro's yields remain unappetising and the deepening gas crisis in Europe means that more aggressive ECB hikes would only deepen recession. We expect EUR/USD to print fresh 20-year lows in coming days, with 0.98 the next obvious target."

Traders see better than 50% odds for a 75 bps move by the ECB on Sept. 8 after a parade of ECB speakers at the Fed's annual symposium in Jackson Hole backed the case for a big hike.

By comparison, bets for a 75 bps increase by the Fed on Sept. 21, while higher at 70%, have receded from as much as 75% on Monday.

Monthly U.S. jobs figures due on Friday will be closely watched for further clues on the rates outlook.

The euro was also helped by a retreat in European gas prices after German economy minister Robert Habbeck said the country was filling gas storage facilities faster than expected.

The dollar slid 0.17% to 138.505 yen, after rising to 139 overnight for the first time since mid-July.

Sterling added 0.1% to $1.17175, recovering from an almost 2-1/2-year low of $1.16495 reached on Monday.

The Aussie edged 0.04% higher to $0.69125, bouncing from $0.6481 in the previous session, a six-week low.