The dollar struggled near seven-week lows on Wednesday after U.S. central bank officials hinted at the possibility of an interest rate cut in the face of rising risks to trade and global growth.
Federal Reserve Chairman Jerome Powell dropped his standard reference to the Fed being "patient" in approaching any rate decision on Tuesday, saying instead the central bank will respond as "as appropriate" to trade pressure.
The dollar index against a basket of six peers was last flat at 97.077, within reach of a recent low of 96.995 brushed overnight - its lowest since April 18. It has now fallen 1.3% from a more than two-year high of 98.371 touched on May 23.
Masafumi Yamamoto, chief currency strategist at Mizuho Securities, said major currencies barely reacted to Powell's comments as investors had already priced in several rate cuts by the Fed on the back of the shifting global growth outlook.
The Fed chairman's comments came a day after St. Louis Federal Reserve President James Bullard said in a speech that a rate cut may be needed "soon."
Rate cuts by some central banks in recent weeks could potentially signal the start of a global monetary easing cycle to stave off a sharper economic downturn.
"Central banks across the globe are adopting a dovish tone. It's kind of a preemptive move," said Yamamoto.
"It doesn't necessarily mean that the economy is worsening - rather the outlook worsened. It's mainly related to the trade tensions between the U.S. and China and the U.S. and Mexico."
Australia's central bank on Tuesday slashed benchmark cash rates to a record low of 1.25% and signalled willingness to go further if the worsening outlook persists.
Last month, New Zealand's central bank cut its benchmark interest rate for the first time in two-and-a-half years as it moved to support a cooling economy and counter global uncertainties.
In South Korea, its central bank last week kept policy settings unchanged but adopted a more accommodative tone while India is expected to cut rates at its policy meeting on Thursday.
On Wednesday, the rose 0.15% to $0.7000 despite data showing growth in the Australian economy picked up only modestly in the first quarter while the annual pace was at its slowest in a decade.
The A$1.9 trillion ($1.3 trillion) economy expanded 0.4% in the three months ended March, while annual GDP rose 1.8%, the weakest since the global financial crisis.
The New Zealand dollar was in the spotlight after a senior official of the Reserve Bank of New Zealand was quoted as saying the central bank's central view was that interest rates would remain broadly around current levels for the foreseeable future.
The kiwi was last up 0.3% at $0.6629, having brushed a one-month low earlier in the session.
Against the , the dollar edged down 0.02% to 108.125 yen per dollar, within striking distance of a near five-month high of 107.845 - its highest since Jan. 10 - hit during the previous session.
Minori Uchida, chief currency analyst at MUFG Bank, said the yen was likely to be supported for the time being as a U.S. rate cut would likely signal further weakness in the global economy.
"The dollar will lose some of its strength if interest rates will actually be cut in the United States," said Uchida.
"Japanese interest rates are already at such a low level that they are unlikely to be cut any further. Rate differentials are likely to get smaller if other countries conduct monetary easing," he said.
The euro was up 0.1% at $1.1260, extending its gains to a fourth session.