The U.S. dollar fell against its most major counterparts in the European session on Tuesday, as investors awaited key inflation data and the Federal Reserve's monetary policy decision for more clues on the interest rate outlook.
U.S inflation is expected to ease to 4.1 percent year-on-year in May from 4.9 percent in the previous month.
On a monthly basis, inflation is expected to slow to 0.2 percent in May from 0.4 percent last month.
The Fed is widely expected to pause its recent interest rate increases but may reiterate its commitment to bring inflation down to its 2 percent target.
The accompanying policy statement may offer insights as to whether there is a chance of another quarter point rate hike next month.
The greenback declined to 1.2576 against the pound and 0.9035 against the franc, off its early highs of 1.2499 and 0.9089, respectively. The next possible support for the currency is seen around 1.27 against the pound and 0.88 against the franc.
The greenback was down against the euro, at a 3-week low of 1.0807. If the currency falls further, 1.10 is likely seen as its next support level.
The greenback fell to near a 5-week low of 0.6787 against the aussie and near a 3-week low of 0.6155 against the kiwi, from its early highs of 0.6737 and 0.6106, respectively. The currency may locate support around 0.69 against the aussie and 0.63 against the kiwi.
Against the loonie, the greenback edged down to 1.3341, reversing from an early high of 1.3378. The greenback is likely to find support around the 1.30 level.
In contrast, the greenback rebounded modestly against the yen, with the pair trading at 139.52. Next key resistance for the currency may be located around the 145.00 level.
Looking ahead, U.S. CPI for May is scheduled for release in the New York session.
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