Germany and France, whose agreements usually pave the way for broader EU deals, proposed that the European Commission borrow 500 billion euros ($550 billion) on behalf of the whole EU. The Commission is expected to outline their proposal before a European summit scheduled for May 27.
The euro was 0.25% higher against the greenback at $1.0942, on pace for a two-day gain of about 1 percent.
"The Franco-German proposal represents a material step forward towards harnessing joint fiscal capacity to provide sustained fiscal stimulus to support the economic recovery," said Lee Hardman, currency analyst at MUFG.
The Australian and New Zealand dollars hung onto hefty gains on Tuesday amid progress on reopening the global economy and optimism about an eventual vaccine.
Against the Japanese yen, which tends to draw investors during times of geopolitical or financial stress as Japan is the world's biggest creditor nation, the dollar rose 0.55% to a near one-month high. The pound rose 0.49% against the dollar.