The U.S. dollar dropped against its key counterparts in the Asian session on Tuesday amid rising risk appetite, as Asian stock markets climbed following gains in Wall Street overnight for a second straight session.

Markets are showing signs of stabilization following last week's brutal selloff that was triggered by worries over rising interest rates.

Investors closely await the U.S. consumer inflation data on Wednesday to assess the likelihood for a faster pace of rate hike by the Federal Reserve.

The Labor Department report is forecast to show prices rose at an annual rate of 1.9 percent in January, down from 2.1 percent in the previous month.

Other key U.S. data slated for release this week include the retail sales and business inventories on Wednesday, weekly jobless claims, producer price index, Empire State manufacturing survey, industrial production and housing market index on Thursday, followed by housing starts, import and export prices and consumer sentiment on Friday.

The greenback slipped to 107.99 against the yen, a level unseen since September 2017. If the greenback falls further, it may find support around the 106.00 level.

Data from the Bank of Japan showed that Japan producer prices picked up 0.3 percent on month in January.

That was in line with expectations and up from the downwardly revised 0.1 percent gain in December.

Reversing from an early high of 0.9399 against the Swiss franc, the greenback hit a 4-day low of 0.9357. The greenback is seen finding support around the 0.92 area.

The greenback that closed Monday's deals at 1.2291 against the euro fell to a 6-day low of 1.2325. The next likely downside target for the greenback is seen around the 1.25 mark.

The greenback dropped to 1.3869 against the pound, from a high of 1.3832 hit at 8:15 pm ET. On the downside, 1.43 is possibly seen as the next support level for the greenback.

The greenback fell to a 6-day low of 0.7289 against the kiwi, compared to 0.7262 hit late New York Monday. The greenback is likely to find support around the 0.74 level.

The greenback ticked down to 1.2571 against the loonie, off its early high of 1.2593. The greenback is likely to challenge support around the 1.24 region.

Looking ahead, Swiss producer and import prices and U.K. consumer and producer prices, all for January, as well as U.K. house price index for December are set for release in the European session.

At 8:00 am ET, Cleveland Fed President Loretta Mester speaks about the economic outlook and monetary policy at the Dayton Area Chamber of Commerce Government Affairs Breakfast.

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