"There are now concerns that when this water recedes, they will leave heavy salt deposits, and possibly make the ground unusable for several years. If this is correct, we could actually see Japan increase the volume of grain that country imports, especially rice," MaxYield Cooperative Grain Solutions Team Leader Karl Setzer said in a report.

The U.S. dollar has been relatively flat ahead of the new home sales numbers Tuesday, but was gaining against the British pound as the Bank of England opted to keep interest rates at current levels, even as hawks said that interest rates should be hiked immediately. They were outvoted six-three.

The U.K. pound was falling 0.8% to $1.6236, while the euro was falling 0.5% at $1.4123 as Europe awaited news on Portugal's budget decision.

"This political uncertainty, added to high financing costs, the lack of ECB (European Central Bank) bond buying and a need to raise 9 billion euros through June, increases the chance that Portugal will need a bailout in the very near future, " said Brown Brothers Harriman Global Head of Currency Strategy Marc Chandler.

The dollar was flat against the Japanese currency at 81.0345 yen as the Nikkei retreated after the Japanese government estimated that reconstruction costs would amount to $300 billion and reports of elevated radiation levels.

U.S. treasuries were rising amid rising tensions in the Libya, fears of elevated radiation levels in Japan and headaches from Portugal's debt crisis.

The 2-year note rose 1/32, with yield down to 0.641%, while the 10-year note was rising 10/32, pushing the yield down to 3.291%. The 30-year bond increased, 23/32, with yields down to 4.395%.

"Today's new home sales number has the potential to influence trade, but traders are more likely to continue to focus on macro developments," according to Briefing.com commentary.

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-- Written by Andrea Tse in New York.

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