The U.S. dollar dropped against the euro and the pound in the New York session on Tuesday, as investors assessed the potential impact of new tariffs imposed by the Trump administration on steel and aluminum imports.

President Donald Trump imposed a 25 percent tariff on steel and aluminium imports, which will take effect on March 12.

Investors fear that the new tariffs might lead to higher inflation and slower economic growth.

Fed officials need not rush to adjust the policy stance, Chair Jerome Powell told lawmakers in the Senate Banking Committee.

Powell noted interest rates have been lowered by a full percentage point since last September, describing the Fed's current policy stance as "significantly less restrictive than it had been."

"We know that reducing policy restraint too fast or too much could hinder progress on inflation," Powell said. "At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment."

The greenback fell to 4-day lows of 1.0350 against the euro, 0.6296 against the aussie and 1.4302 against the loonie, off its early highs of 1.0291, 0.6260 and 1.4345, respectively. The greenback may face support around 1.05 against the euro, 0.65 against the aussie and 1.38 against the loonie.

The greenback declined to 0.5659 against the kiwi, from an early 1-week high of 0.5629. The greenback is poised to challenge support around the 0.59 level.

The greenback weakened to 1.2421 against the pound, from an early 8-day high of 1.2332. The greenback is likely to face support around the 1.26 level.

In contrast, the greenback climbed to an 8-day high of 0.9140 against the franc and a 5-day high of 152.59 against the yen, off its early lows of 0.9106 and 151.64, respectively. The currency is seen finding resistance around 0.93 against the franc and 158.00 against the yen.

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