The dollar was little changed against the euro Tuesday as most of the currency markets focused on trading in yen.

In light trading, the euro rose to $0.8748, up from $0.8743. The yen, meanwhile, gained ground against both the dollar and the euro as optimism from a Japanese equities rebound supported the currency. But as the initial fervor died down, the yen lost some of its earlier gains.

The dollar traded for 124.83 yen on Tuesday, down from its close of 125.16 yen on Monday, but off of the day's lows. The euro changed hands at 109.20 yen, down slightly from 109.38 yen at last close, but also off the day's lows.

The initial jump in the value of the yen came after the Nikkei 225 closed up more than 2% from yesterday's 16-year lows. Some of those gains were lost as uncertainty over the direction of the new government's coming reforms took hold.

Trading in tight ranges against other currencies, the U.S. dollar gained slightly against the British pound, but lost ground to both the Australian and the Canadian dollars.