The dollar sank on news that two additional Republican senators had opposed the Republican health-care bill. There are now four GOP senators who have voiced opposition to the bill, which is likely enough to stop it dead in its tracks: The GOP holds 52 seats in the Senate.
The dollar index, which measures the dollar against a basket of currencies, traded at 94.744 at 3:08 p.m. HK/SIN, its weakest levels since September 2016. Against the yen, the greenback fetched 112.25 yen, off levels around the 113 handle seen the last two weeks.
Meanwhile, the euro gained against the dollar to trade at $1.1516.
Investors were now more doubtful over the future of U.S. tax reforms, given the difficulty the health-care bill has faced in making progress, OANDA senior trader Stephen Innes told CNBC. The health-care bill being passed would have added money in the coffers for the government to enact subsequent tax reforms, Innes added.
"The market has a tendency to overreact, but it looks like another nail in the coffin (for the bill)," Innes said.
Gold prices traded at around a two-week high amid uncertainty over future increases in U.S. interest rates. Prices of the precious metal usually have an inverse relationship with interest rates: Higher interest rates make the opportunity cost of holding gold higher.
Spot gold traded as high as $1,238.27 an ounce from a low of $1,233.02 seen earlier in the session. The precious metal traded at $1,234.27 at 3:13 p.m. HK/SIN.
Markets also digested better-than-expected second-quarter GDP from China released Monday. The Chinese growth rate was 6.9 percent on year compared to the 6.8 percent forecast.
Mainland markets stumbled on Monday despite the positive Chinese data, with analysts attributing dampened market sentiment to a financial policy meeting that took place at the weekend. The Shanghai Composite ended the Monday session down 1.4 percent and the Shenzhen Composite fell 4.3 percent.
Still, the strong data is expected to provide a leg of support to commodity markets going forward, ANZ Research economist Giulia Lavinia Specchia said in a Tuesday note.
"Industrial metals were the main beneficiary, but the economic data continues to paint a positive picture for the entire sector," Specchia added.
Copper prices edged down to trade at $5,985.00 a ton after touching a four-month high of $6,004.50 overnight.
Major mining stocks in Australia closed down after trading higher earlier in the session. Diversified miner BHP slid 0.28 percent. Iron ore producer Fortescue Metals was off 0.19 percent.
Rio Tinto closed lower by 1.49 percent. The miner announced Tuesday morning it had lowered its iron ore guidance to 330 million tons compared to an earlier range of 330 million to 340 million tons.
In currencies, the New Zealand dollar rose after sinking on news that inflation for the second quarter slowed more than expected. The Kiwi dollar traded at $0.7345 at 3:20 p.m. HK/SIN after falling as low as $0.7261 earlier in the session.
The Australian dollar traded at two-year highs. The Aussie dollar fetched $0.7909 at 3:08 p.m. HK/SIN.
Meanwhile, the British pound retraced losses made in the previous session as Brexit talks kicked off. The pound traded at $1.3101 at 3:10 p.m. HK/SIN after trading as low as $1.3059 in the last session. Sterling had traded at a 10-month high at the end of last week.
In energy news, oil prices edged down after trending higher earlier in the session. Brent crude slid 0.23 percent to trade at $48.31 a barrel and U.S. crude declined 0.28 percent to trade at $45.89.
In corporate news, Toshiba announced it would not close a deal on the sale of its memory chip unit before July 28. The company said its current aim is to complete the deal by the end of March 2018. Toshiba shares closed up 19.08 percent.
South Korea's Samsung Electronics announced a partnership with payments platform PayPal to allow for the latter's use within the Samsung Pay system in the U.S. Users in other countries will be able to access the service "soon," Samsung said in a statement. The company's shares rose 0.39 percent by the end of the session.
Chinese property developer Sunac saw its shares fall on concerns that Chinese banks were looking into its credit risk, media reports said. Sunac is buying $9.3 billion in assets from Dalian Wanda. Sunac shares were down 6.98 percent at 3:13 p.m. HK/SIN, having plunged more than 13 percent earlier in the session.
Still, some are believers in the deal: Deutsche Bank raised its price target for Sunac to 19.12 Hong Kong dollars from 17.20 Hong Kong dollars and maintained its "Buy" call following Sunac's proposed acquisition.
The price Sunac is acquiring Wanda's hotels at is "cheap" and provides scope for Sunac to improve its cash flow if it subsequently disposes of some of the hotels, Deutsche Bank analysts Jeffrey Gao, Jason Ching, Stephen Cheung and Foo Leung said in a note on July 17.
New home prices in China rose 10.2 percent on year for the month of June, compared to the 10.4 percent rise seen in May. On a monthly basis, June home prices rose 0.7 percent, comparable to the rise seen in the previous month, Reuters said.
A slew of economic data is expected during European hours, with U.K. inflation, PPI and retail prices due at 4:30 p.m. HK/SIN.
Stateside, stocks closed mostly flat as the markets anticipated earnings reports due later in the week.
— CNBC's Jacob Pramuk contributed to this report.