The U.S. dollar dropped against its major counterparts in the European session on Tuesday, following a slight fall in U.S. Treasury yields and investors digested the comments from U.S. Treasury Secretary Janet Yellen that there are tools to address inflation.

In an interview with MSNBC on Monday, Yellen said that President Joe Biden's $1.9 trillion coronavirus aid package is aimed to provide needed relief and help the economy return to full employment by next year.

If inflation does become a problem, "there are tools to address that," Yellen told.

Investors focused on progress in the relief bill, which includes $300 per week in unemployment benefits and $1,400 in direct payments to most Americans.

U.S. House Speaker Nancy Pelosi said that the chamber will approve the $1.9 trillion package by Wednesday.

Democrats want the legislation to be passed by Sunday, when the current expanded unemployment benefits run out.

Moving away from a 9-month high of 109.23 against the yen and a 3-1/2-month high of 1.1836 against the euro, the greenback weakened to 108.56 and 1.1916, respectively. Next key support for the greenback is seen around 105.00 against the yen and 1.20 against the euro.

The greenback touched a 4-day low of 1.3900 against the pound, following a high of 1.3802 set at 7:30 pm ET. The greenback is seen finding support around the 1.41 level.

The greenback reversed from its early 7-1/2-month high of 0.9376 against the franc and declined to 0.9306. If the greenback falls further, 0.92 is possibly seen as its next support level.

The greenback edged down to 0.7180 against the kiwi and 0.7719 against the aussie, off its early 4-day highs of 0.7103 and 0.7622, respectively. The greenback is poised to test support around 0.74 against the kiwi and 0.80 against the aussie.

The U.S. currency depreciated to a 5-day low of 1.2591 against the loonie, down from a high of 1.2686 seen at 8:45 pm ET. The greenback may find support near the 1.24 level.

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