Pound briefly neared session low after report of shots fired outside UK Parliament

Matt Cardy | Getty Images

The dollar lost further ground on Wednesday and hit a four-month low against the safe-haven yen, with investors rethinking the growth expectations under a Trump administration that had pushed the greenback to a 14-year peak and stocks to record highs.

The U.S. dollar, which slipped after last week's less hawkish U.S. Federal Reserve monetary policy statement, took a turn for the worse this week amid growing doubt about the potential pace of U.S. interest rate increases.

On Wednesday, the dollar index, which measures the greenback against a basket of six major currencies, was down 0.25 percent at 99.57, its lowest since Feb. 3.

"We had moved ahead in anticipation of fiscal boosts and now are about 60 days into the (new) administration and the market is yet to see any materiality behind the fiscal policy,ΓÇ¥ said
Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California.

"The longer there is lack of materiality the greater the skepticism."

Sterling fell to the day's low of $1.2426 against the dollar after loud bangs were heard outside Britain's parliament. Police said they were called to a firearms incident on Westminster Bridge near parliament.

Against the , which investors traditionally flock to during times of risk aversion, the dollar fell as much as 0.85 percent to a four-month low of 110.76 yen, with nervousness deepening ahead of a key healthcare vote in U.S. Congress on Thursday.

"There is certainly a bit more bullishness in the yen over the last two weeks and we are seeing that continue," Trang said.

For risk markets to look better by the end of this week, the healthcare bill would need to pass and there would need to be signs of improving U.S. business sentiment when the durable goods orders report comes out on Friday, Morgan Stanley strategists led by Hans Redeker wrote in a note.

The U.S. currency has also felt pressure from a resurgent euro in recent days, on growing expectations of a tightening in European Central Bank monetary policy this year, and on bets the anti-euro candidate Marine Le Pen will be defeated in the French presidential elections.

The was trading up 0.05 percent on the day at $1.0813.