The euro climbed on Tuesday, boosted by the European Central Bank's plans to hike interest rates to combat inflation, while the yen retested a 24-year low as the Bank of Japan's ultra-easy monetary policy weighed.

The euro rose 0.5 percent to $1.0563 after ECB Chief Economist Philip Lane stated that the ECB will raise interest rates by 25 basis points at its July meeting, but the amount of the boost in September is still to be determined, implying that a larger 50 basis point hike could be on the books. Meanwhile, Francois Villeroy de Galhau, an ECB policymaker, stated that the central bank's planned weapon to combat financial fragmentation must allow it to back up its commitment to safeguard the euro.

"The pledge to address fragmentation makes it simpler for the ECB to hike rates because it allows them to do so while keeping a close eye on one or two unstable markets," said Marshall Gittler, BDSwiss' Head of Investment Research. The dollar surged 0.2 percent to 135.35 yen, not far from a 24-year high of 135.60 yen set early last week, as the Bank of Japan shattered any hopes of a policy shift and reaffirmed its commitment to its ultra-easy monetary policy.

The dollar index, which measures the value of the dollar against six major currencies, including the euro and the yen, was down 0.3 percent at 104.10, as investors awaited Federal Reserve Chair Jerome Powell's testimony to Congress, which begins on Wednesday.

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