The dollar was lower against the yen on Tuesday, with investors seeking to take profits on overnight gains in the greenback, as Tokyo stocks failed to pick up on the positive mood in overseas stock markets.

The downward movement gained momentum as the Reserve Bank of Australia surprised markets by cutting rates, which triggered sharp declines in the Australian currency against the yen, a fall in the Nikkei Stock Average NIK, -1.27%  and a further drop in the U.S. dollar to as low as ¥116.87.

The dollar USDJPY, -0.24%  was at ¥117.43 at the latest, compared with ¥117.48 late Monday in New York.

The benchmark Nikkei index closed down 1.3% despite gains on Wall Street overnight, prompting buying of the safe-haven Japanese currency and selling of the dollar to take profits.

“Because the Australian dollar fell considerably (against the yen), the Nikkei index stretched its losses even further,” putting more downward pressure on the dollar against the yen, said Yuzo Sakai, manager at FX business promotion at Tokyo Forex & Ueda Harlow.

Abreast of the market: Small-caps make gains

Paul Vigna and Dan Strumpf discuss the growth of small-cap stocks, and Jim Rudden looks at the top social media moments from the Super Bowl.

The Australian dollar AUDJPY, -1.83%  hit as low as ¥89.37, before changing hands at ¥90.22, compared with ¥91.70 late Monday. Against the U.S. dollar, the Aussie dropped to $ 0.7670, down from $ 0.7803 on Monday.

Aussie rate cut: The RBA lowered its benchmark interest rate to a record low of 2.25%, joining a procession of central banks that have eased policy settings since the start of the year in response to the deflationary impact of tumbling oil prices.

The RBA’s decision may cloud expectations that the Federal Reserve will go ahead with interest rates increase as early as later this year.

“With the global economy slowing down and showing signs of reaching a turning point, the Fed may have to change its stance slightly,” said Sakai, adding that accelerated one-sided strength in the U.S. currency as a result of an eventual rate increase could raise problems.

Greek progress: The euro EURUSD, +0.06%  rose slightly to $ 1.1352 from $ 1.1341 on Monday, on signs the standoff between the new Greek government and its creditors could soon come to an end. In an interview with the Financial Times, Greek Finance Minister Yanis Varoufakis backed away from requesting a debt write-down and instead proposed a debt-swap plan, where repayments are linked to future growth. Greece’s eurozone partners had early in the negotiations ruled out a haircut on Greek debt, stressing the country must stick to its agreements.

Varoufakis’s proposal was welcomed by financial markets, with Greek yields moving sharply lower and the Athex Composite index GD, +9.79%  rallying more than 7%.

The WSJ Dollar Index BUXX, -0.04% a measure of the dollar against a basket of major currencies, was up slightly lower at 85.67. The ICE dollar index DXY, -0.10%  fell 0.03% to 94.48.

The pound GBPUSD, +0.22%  climbed to $ 1.5055 from $ 1.5039 on Monday.