"After a massive buildup in long positions earlier this week, currencies are in full reversal mode, with the dollar falling aggressively."
The dollar index fell to two-week lows and was last at 100.58, down 1.09 percent.
The euro rose to five-week highs against the dollar and last changed hands at $1.0726, up 1.17 percent.
Against the yen, the dollar fell to two-week lows and last traded at 113.38 yen, down more than 1 percent on the day.
The greenback also fell to its lowest level in four weeks against the Swiss franc, and it weakest in two weeks versus sterling.
Yet despite the dollar's sharp losses on Wednesday, Bill Northey, chief investment officer at the private client group of U.S. Bank in Helena, Montana, said the currency's weakness is only short-term in nature.
"We continue to believe that there is strong underpinning for U.S. dollar strength in the more intermediate term," Northey said.
"That's based on the rate differential path to monetary policy among major central banks around the world. And that's not likely to change."
Fed funds futures have priced in a nearly 50 percent chance of another rate increase in June and an almost 60 percent probability of one at the July meeting, according to the CME's FedWatch.
—CNBC contributed to this report.