The dollar tumbled to a three-week low against the yen on Thursday as investors continued to pare back bullish bets on the greenback after minutes of the Federal Reserve's latest meeting pushed out expectations on when interest rates will begin to rise.
The U.S. currency, however, gained against a struggling euro, as investors sold the single euro zone unit after it failed to get above $1.28. Earlier in the global session, the euro rose to a two-week high versus the dollar.
U.S. Treasury yields and implied rates on Fed fund futures retreated sharply after the release on Wednesday of the Fed minutes, with the market not seeing any appreciable rise in the Fed's target rate until around September 2015, from June 2015 previously.
Still, many believe the dollar will resume its rally, because the U.S. economy remained on a stable growth path.
In the meantime, the U.S. labor market continued to stabilize as the number of Americans filing new claims for unemployment benefits fell last week to nearly the lowest level since before the 2007-09 recession. The government reported that initial claims for state unemployment benefits dropped to a seasonally adjusted 287,000 in the week ended Oct. 4.
The dollar, which has a strong correlation with U.S. yields and rate expectations, fell 0.3 percent against the yen, to 107.78 yen, trimming losses after the jobless claims data. It earlier fell to 107.53 yen, its lowest mark since mid-September.
The dollar index, which measures the greenback against six major currencies, slid initially, hitting a two-week low of 84.937, before reversing course. It was last up 0.3 percent at 85.533.
With the dollar coming under pressure, the euro earlier rose to $1.2791, its highest level in two weeks, and nearly 3 cents above a two-year trough near $1.2500 set last week. But in late trading, the euro fell 0.4 percent to $1.2686.
However, Osborne said the dollar pullback may have further to run to correct the currency's overbought position. He noted that historically the dollar tends to weaken in the fourth quarter, and the market may be seeing that right now.