The U.S. dollar drifted lower against its most major counterparts in European session on Tuesday, as the demand for safe-haven assets waned in the wake of improved risk sentiment following upbeat economic reports from Eurozone, while lingering worries over U.S. political turmoil also weighed.

The latest controversy emerge from a media report that the U.S. President has requested two top intelligence officials in March to help him push back against the FBI's probe into possible collusion between the Trump campaign and Russian government.

The Washington Post reported Monday that Trump pressed National Security Agency chief Michael Rogers and Director of National Intelligence Dan Coats to dismiss any evidence of collusion in the 2016 Presidential election.

Persistent controversies over links between the Trump administration and Russia in Presidential campaign stoked uncertainty about the government's ability to deliver fiscal stimulus.

The 10-year Treasury yield fell 2 basis points to 2.25 percent. Yields move inversely to bond prices.

Traders look forward to the release of the Fed minutes on Wednesday for further hints about a rate hike in June. Other key economic data include new home sales due today, existing home sales on Wednesday, weekly jobless claims and international trade on Thursday, followed by GDP, durable goods orders and consumer sentiment on Friday.

Eurozone private sector logged the fastest growth for six years in May, flash data from IHS Markit showed. The flash composite output index came in at 56.8, unchanged from April's six-year high while economists expected the index to fall slightly to 56.7.

French private sector grew at the sharpest pace in six years in May, with the headline index climbing to a 72-month high of 57.6 in May from 56.6 in April.

The greenback showed mixed performance in the Asian session. While the currency rose against the pound, it held steady against the euro and the franc. Against the yen, it fell.

The greenback edged down to 0.9702 against the franc, off its early high of 0.9745. Continuation of the greenback's downtrend may see it challenging support around the 0.96 region.

The greenback held steady against the euro, after falling to a 6-1/2-month low of 1.1268. If the greenback extends fall, it may locate support around the 1.14 level.

Flash data from IHS Markit showed that Eurozone manufacturing Purchasing Managers' Index rose to a 73-month high of 57.0 from 56.7 in April. The expected score was 56.5.

The flash composite output index came in at 56.8 in May, unchanged from April's six-year high. The score was forecast to fall slightly to 56.7.

The greenback weakened to 1.3456 against the loonie, a level not seen since April 24. Further weakness may take the greenback to a support around the 1.32 mark.

Extending early fall, the greenback slid to more than a 4-week low of 0.7045 against the NZ dollar. The next possible support for the greenback is seen around the 0.715 area.

The greenback fell back to 0.7508 against the aussie, a pip short of its Asian session's near 3-week low of 0.7509. On the downside, the greenback may target 0.76 as the next support level.

On the flip side, the greenback edged up to 111.32 against the yen, off its early 5-day low of 110.86. If the greenback extends rise, 112.00 is likely seen as its next resistance level.

Preliminary data from IHS Markit showed that Japan's manufacturing activity expanded at the weakest pace in six months in May.

The Nikkei Flash Manufacturing Purchasing Managers' Index, or PMI dropped to 52.0 in May from 52.7 in April.

Although the greenback staged a brief decline to 1.3001 against the pound from an early 4-day high of 1.2953, it failed to hold course on the back of the strength of the latter. The pair finished Monday's trading at 1.2999.

Data from the Office for National Statistics showed that the UK budget deficit increased in April.

Public sector net borrowing excluding public sector banks increased by GBP 1.2 billion from previous year to GBP 10.4 billion in April, this was the highest April borrowing since 2014.

Looking ahead, U.S. new home sales for April and Markit's flash manufacturing PMI for May as well Canada wholesale sales for March are set for release in the New York session.

At 3:00 pm ET, Minneapolis Fed President Neel Kashkari participates in a panel discussion about building economic well-being through home-ownership at the Center for Indian Country Development, in Minneapolis

Philadelphia Fed President Patrick Harker speaks about the economic outlook at the Harvard Club, in New York at 5:00 pm ET.

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