Forexpros – The U.S. dollar was lower against its major counterparts on Tuesday, as investor sentiment was boosted by hopes that the escalating crisis in the euro zone would prompt world central banks to act to support the global economy.

During European afternoon trade, the greenback was down against the euro, with EUR/USD gaining 0.34% to hit 1.2619.

The Federal Reserve was to begin its two-day policy meeting later Tuesday, amid speculation over the possibility of a third round of easing from the central bank.

Meanwhile, the yield on Spanish 10-year bonds eased back to 7.05% from a session high of 7.13%, but remained above the critical 7% threshold amid concerns that a EUR100 billion bailout agreed earlier this month may not be enough to overhaul the country’s ailing banking system.

Earlier Tuesday, Madrid saw short-term borrowing costs rise to euro-era highs at an auction of government bonds.

Elsewhere in the euro zone, a report showed that the ZEW index of economic sentiment in Germany tumbled in June, amid concerns over political instability in Greece and worries over sovereign debt contagion.

The greenback was fractionally lower against the pound, with GBP/USD inching up 0.05% to hit 1.5673.

The pound remained under pressure after an unexpected decline in U.K. consumer price inflation in May added to expectations for more quantitative easing from the Bank of England, as until now inflation has been easing more slowly than the bank had hoped.

The U.K. Office for National Statistics said that consumer price inflation fell to 2.8% year-over-year from 3.0% in April, defying forecasts for an unchanged reading.

Elsewhere, the greenback was down against the yen and the Swiss franc, with USD/JPY slipping 0.25% to hit 78.90 and USD/CHF losing 0.35% to hit 0.9514.

The greenback was weaker against its Canadian, Australian and New Zealand counterparts, with USD/CAD sliding 0.28% to hit 1.0213, AUD/USD rising 0.40% to hit 1.0166 and NZD/USD advancing 0.50% to hit 0.7961.

The Australian dollar found support after the minutes of the Reserve Bank of Australia’s June meeting indicated that another rate cut was unlikely in the coming months, after the central bank surprised markets with a larger-than-expected rate cut this month.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.29%, to trade at 82.01.

Later in the day, the U.S. was to publish official data on building permits and housing starts. In addition, leaders from the Group of 20 nations were to hold a second day of talks in Los Cabos, Mexico.