The dollar slipped on Wednesday as risk appetite faded after U.S. President Donald Trump unexpectedly fired FBI Director James Comey, raising questions about whether this latest crisis could impede the implementation of the government's economic agenda.
"The tone is mildly risk-averse but perhaps reflects a collective shift to neutral for markets, until there is a little more clarity on the Trump/FBI front," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
Trump said Comey - who had been leading an investigation into his 2016 presidential campaign's possible collusion with Russia to influence the election outcome - was let go due to his mishandling of an email scandal involving presidential nominee Hillary Clinton.
But the move ignited a political firestorm, raising suspicions that the White House was trying to blunt the FBI probe involving Russia.
The market though remains dollar-bullish especially against the yen as investors expect U.S. growth to pick up in the second half of the year and the Federal Reserve to maintain its rate-hike stance.