The U.S. dollar appreciated against its major counterparts in the European session on Tuesday, as risk sentiment turned sour amid weaker commodity prices and as China's top banking regulator expressed fears about bubbles in in financial markets.

Bubbles in US and European markets could burst because their rallies are heading in the opposite direction of their underlying economies and would have to face corrections "sooner or later," Guo Shuqing, Chairman of the China Banking and Insurance Regulatory Commission (CBIRC) and Party secretary of the central bank said.

Guo's comments stocked concerns about further tightening in the world's second-biggest economy.

Oil prices dropped amid worries that OPEC and its allies could consider raising output when they meet later this week.

The Fed's dismissal of higher yields supported the dollar and contrasted with the approach from other central banks.

Traders await a series of Fed speeches this week, culminating with Powell on Thursday and the February U.S. employment report due on Friday, which will provide an update on the speed and direction of the nation's labor market recovery.

The greenback rose back to 106.91 against the yen, a pip short of its Asian session's more than a 6-month high of 106.92. The greenback is likely to face resistance around the 108.00 region, if it gains again.

The greenback firmed to 1.1992 against the euro, its highest level since February 5. Next key resistance for the greenback is likely seen around the 1.18 level.

Preliminary figures from Destatis showed that German retail sales decreased for a second straight month and at a faster than expected pace in January.

Retail sales fell 4.5 percent month-on-month, which was worse than the 0.3 percent decline economists had expected. In December, sales decreased 9.1 percent.

The greenback spiked up to its strongest level since November 2020 versus the franc, at 0.9194. The U.S. currency is poised to challenge resistance around the 0.94 mark.

The greenback approached near a 2-week peak of 1.3859 against the pound, up from Monday's closing value of 1.3926. The next possible resistance for the currency is seen around the 1.37 level.

Survey data from the Nationwide Building Society showed that UK house price inflation accelerated in February, defying expectations for further slowing.

The house price index rose 6.9 percent year-on-year following 6.4 percent rise in January. Economists had expected the rate to ease to 5.6 percent.

In contrast, the greenback eased off to 1.2645 versus the loonie, heading to pierce its Asian session's 4-day low of 1.2638. The greenback may challenge support around the 1.25 mark.

The greenback dropped to a 4-day low of 0.7803 versus the aussie, off its prior high of 0.7736. The greenback is seen finding support around the 0.81 region.

Australia's central bank left its cash rate and asset purchase programme unchanged and indicated that it will not raise the rate until inflation returns to the target range.

The policy board of the Reserve Bank of Australia headed by Governor Philip Lowe decided to hold its cash rate at a record low of 0.10 percent.

The greenback retreated to 0.7266 versus the kiwi, following near a 2-week high of 0.7209 seen earlier in the session. If the greenback weakens further, 0.74 is possibly seen as its next support level.

Looking ahead, Canada GDP data for the fourth quarter will be published in the New York session.