USD fell against other major currencies in the European session on Tuesday as market optimism renewed as major economies around the world were continuing easing of their corona-related restrictions. The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, dropped 0.66% to 99.20.

Japan lifted the state of emergency on Monday, while the UK's Prime Minister Boris Johnson announced the reopening of shops and small businesses around the country next month, and Germany was reported to be ready to relax travel restrictions over the coming days.

The market sentiment, however, was kept in check by the U.S.-China tensions. White House National Security adviser Robert O'Brien warned over the weekend that Beijing's attempt to impose new security restrictions on Hong Kong could make Washington reconsider special trading status with Hong Kong, which would lead to sanctions against China and Hong Kong. Meanwhile, China's foreign minister accused "some U.S. political forces” that "are taking hostage of China-U.S. relations" of pushing "the ties to the brink of the so-called new Cold War”. China's President Xi Jinping told the state television on Tuesday that the country would increase preparations for military combat.