The dollar fell on Wednesday as investors positioned for a U.S. interest rate hike in September pulled back after minutes from a Federal Reserve policymakers meeting delivered no solid signals on when the era of near-zero rates will end.
The keenly awaited minutes from the July 28-29 meeting of the Federal Open Market Committee showed just one panel member as ready to raise rates.
Others acknowledged that improving labor markets and other necessary economic conditions were falling into place for the first U.S. rate hike in nearly a decade, according to the minutes.
"These minutes don't give a clear view in either direction about September, about whether or not the Fed is more or less likely to hike in September," said Brian Daingerfield, currency strategist at the Royal Bank of Scotland in Stamford, Connecticut. "That is why you have seen the dollar sell off."
In the over-the-counter market, three-month overnight indexed swap rates implied traders now see a 35 percent chance of the Fed hiking rates in September, lower than a 46 percent chance late on Tuesday, according to data from Tullett Prebon.
The dollar index was last down 0.6 percent after trading in a tight 40 basis point range most of Wednesday.
The euro traded up more than 1 percent against the dollar at above $1.1130, and last traded at $1.1124. The euro was helped by shriveling appetites for risk among investors with euro-funded positions in emerging market currencies who were now buying back the single currency.
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The dollar was down 0.4 percent against the at 123.86 yen, and off 0.1 percent against the British pound at $1.5680.
The Bank of England is expected to follow the Fed with a hike, and that view was bolstered on Tuesday by higher-than-expected core UK inflation numbers.
The dollar was also down more than 1 percent against the Swiss franc, a frequent safe-haven asset that gained on Wednesday on an erratic Chinese stock market that stoked fears about the stability of the world's second-largest economy
Traders on Wednesday largely shrugged off U.S. consumer price inflation data, one of the week's potentially more influential economic reports that showed shop-level prices rising a slight 0.1 percent in July.
"There is little in the current report to dissuade any FOMC members from taking rates off the zero bound," said strategist Gennadiy Goldberg at TD Securities in New York. "The low inflation profile will certainly keep the Fed communicating a gradual glide path."