The U.S. dollar fell against its most major counterparts in the European session on Tuesday, as sentiment improved following a recovery of Turkish lira after the country's central bank introduced measures to boost liquidity in the market.

On Monday, Turkey's central bank announced a series of measures to improve liquidity in the banking system and cut reserve requirements to stabilize the lira.

The central bank cut the lira's reserve requirement ratio by 250 basis points for all maturity brackets and lowered reserve requirement ratios for non-core FX liabilities by 400 basis points for maturities up to three years to contain the currency crisis.

Data from the Labor Department showed that U.S. import prices came in unchanged in the month of July.

The Labor Department said import prices were unchanged in July after edging down by a revised 0.1 percent in June.

Economists had expected import prices to inch up by 0.1 percent compared to the 0.4 percent decrease originally reported for the previous month.

The currency showed mixed trading against its major rivals in the Asian session. While it rose against the yen and the franc, it held steady against the euro. Against the pound, it dropped.

The greenback eased to 110.79 against the yen, after rising to a 4-day high of 111.15 at 3:05 am ET. On the downside, 109.00 is likely seen as the next support for the greenback.

Preliminary figures from the Ministry of Economy, Trade and Industry showed that Japan's industrial production decreased less than initially estimated in June.

Industrial production dropped a seasonally-adjusted 1.8 percent month-over-month in June, faster than the 0.2 percent fall in the previous month. That was slower than the 2.1 percent decline in the flash data.

The greenback dropped to 4-day lows of 0.6610 against the kiwi and 1.3072 against the loonie, off its early highs of 0.6570 and 1.3136, respectively. The greenback is seen finding support around 0.67 against the kiwi and 1.28 against the loonie.

The greenback slipped to a 5-day low of 0.9901 against the franc, off an early high of 0.9945. The next possible support for the greenback is seen around the 0.97 region.

The greenback held steady against the euro, after having eased from a high of 1.1380 touched at 5:00 am ET. At yesterday's close, the pair was worth 1.1410.

Survey data from the Centre for European Economic Research showed that Germany's economic confidence improved more than expected in August.

The ZEW Indicator of Economic Sentiment climbed notably to -13.7 in August from -24.7 in July. On the flip side, the greenback ticked up to 1.2772 against the pound, from a 4-day low of 1.2827 seen at 4:30 am ET. If the greenback rises further, 1.25 is likely seen as its next resistance level.

Data from the Office for National Statistics showed that the UK unemployment rate dropped to a new low in the second quarter.

The ILO jobless rate came in at 4 percent in the second quarter, the lowest since February 1975. The rate was expected to remain unchanged at 4.2 percent.

The greenback advanced to a 7-1/2-month high of 0.7252 against the aussie at 4:45 am ET and held steady thereafter. The greenback is poised to find resistance around the 0.70 level.

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