The dollar fell from a seven-month high against a basket of currencies on Thursday as some traders bet it may have rallied too quickly recently on optimism about the U.S. economy.
The dollar also came off a three-month peak against the euro and surrendered most gains versus the yen, but analysts say the outlook for the U.S. currency remains bright on expectations the U.S. economy is outperforming its major counterparts.
U.S. jobless claims unexpectedly fell in the latest week, while the current account deficit narrowed in the fourth quarter, government data showed Thursday. Other reports over the past week highlighted improvement in the U.S. labor market and consumer spending.
"We're at a point right now where we're going to need some significantly positive news to help the dollar post its next leg higher," said Omer Esiner, chief market analyst with Commonwealth Foreign Exchange in Washington. "We're going to need confirmation from upcoming U.S. economic data that the optimism surrounding the U.S. recovery is justified."