USD fell against its major rivals in the European session on Tuesday as the Fed policymakers managed to reassure market participants that the U.S. monetary policy would remain accommodative in the near future.

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, dropped 0.44% to 89.77.

April’s surge in the U.S. consumer prices heightened worries last week that an acceleration in inflation could force the U.S. central bank to pull back on its monetary stimulus and hike interest rates sooner than expected. However, the Fed’s representatives have continued to repeat their views that any surge in inflation will be temporary. The Fed's vice chairman Richard Clarida said on Monday that he believes that most of the price rises will be transitory but the Fed has to be attuned and attentive to incoming data. Meanwhile, Atlanta Fed president Raphael Bostic said that now is not the time to worry about rising inflation, adding that he thinks that a healthy level of inflation is healthy for the economy, particularly at a time when unemployment remains a problem. He also supported the Fed’s current ultra-loose policy stance. Elsewhere, Dallas Fed president Robert Kaplan reiterated yesterday that he does not expect rates to rise until next year. 

Investors are now awaiting the release of the minutes from the Fed's last meeting, due this Wednesday, which could provide some clues on policymakers’ views on recovery of the U.S. economy and rising inflation pressures as well.