The dollar recouped some losses on Wednesday as traders looked to see which other major central banks might follow the U.S. Federal Reserve and make emergency cuts to their interest rates.
The Fed surprised investors by slashing rates by 50 basis points to a target range of 1.00% to 1.25% on Tuesday, two weeks before a regularly scheduled policy meeting, in an effort to combat the effects of the coronavirus.
The euro has been one of the currencies to climb on the broad-based dollar weakness of recent weeks and it had slipped back to $1.1145 ahead of U.S. trading from Tuesday's two-month high at $1.12135.
"We are looking at how the central bank community is going to react now," said TD Securities' European Head of Currency strategy, Ned Rumpeltin.
Could more central banks make emergency cuts? "We are expecting the unexpected. We are not taking anything for granted here," he added.
Money markets in the euro zone are pricing a 90% chance that the ECB will cut its deposit rate, now minus 0.50%, by 10 bps next week.
They are also pricing a 50% chance of a second, 25 bps cut in April by the Fed though some analysts are already talking about U.S. central bank hitting zero percent before the end of the year.
"The dollar's weakness is reflected in the euro, because the Fed will likely ease more than the ECB," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
The dollar, which also fell to a five-month low of 106.85 yen in Asia on Wednesday, was last up 0.35% at 107.51 yen. It was also up 0.2% against a basket of currencies.
The chance of a swift cut from the Bank of England brought sterling down to $1.2792, 0.2% on the day. Uncertainty about trade talks between Britain and the European Union is weighing on sterling too.
There were also other factors to digest for the dollar.
Joe Biden made a surprisingly strong showing on Tuesday across the South, Midwest and New England in the contest to select a Democratic challenger to U.S. President Donald Trump in the Nov. 3 election.
"The resurgence of Joe Biden will help to dampen some of the downside risks for the U.S. dollar given fears over a sharper shift to the left under Bernie Sanders have eased," wrote MUFG currency analyst Lee Hardman.
In the Chinese onshore market, the yuan touched asix-week high of 6.9288 per dollar, another sign of the dollar's weak bias. It shrugged off a survey showing China's services had their worst month on record in February.