The dollar slid on Thursday against some major currencies such as the euro, Swiss franc, and sterling, weighed down by the impasse in Congress about additional U.S. stimulus to help cope with the coronavirus pandemic.
In the afternoon session though, the dollar trimmed its losses, as U.S. stock indexes fell.
After losing 10% of its value from a peak in March, the dollar has been bouncing around its lowest levels in more than two years since late July.
Investors, however, remained focused on the stimulus package talks, which broke down last week.
Funding for the U.S. Postal Service and to shore up election infrastructure became a major sticking point in congressional talks on coronavirus relief, as President Donald Trump vowed to block any money to facilitate mail-in voting.
On Wednesday, Trump accused congressional Democrats of not wanting to negotiate over a U.S. coronavirus aid package as Republican and Democratic negotiators traded blame for a five-day lapse in talks over relief legislation.
"The stalemate over the stimulus package is troubling," said Amo Sahota, executive director at currency advisory firm Klarity FX in San Francisco. "Sticking more band-aid over it, which is what the administration is trying to do right now, is not enduring."
In afternoon trading, the euro was up 0.1% at $1.1798. Since the beginning of July, the euro has gained nearly 6%versus the dollar. Against the Swiss franc, the dollar fell 0.2% to 0.9105 franc.
Sterling also rose 0.3% versus the dollar to $1.3051.
The dollar index was little changed to slightly lower at 93.316. Earlier, it fell to a one-week low.
"The dollar being weaker is a sign of positive risk sentiment," said Klarity's Sahota. "The market is moving to places that would give them a better return and more comfortable in buying the Australian dollar, euro, and even the pound."
The dollar also shrugged off better-than-expected U.S. jobless claims data. Initial claims for state unemployment benefits decreased 228,000 to a seasonally adjusted 963,000 for the week ended Aug. 8.
That was the lowest level since mid-March when authorities started shutting down non-essential business to slow the spread of the virus.
Economists polled by Reuters had forecast 1.12 million applications in the latest week.
Against the yen, the dollar was flat at 106.91 yen. The offshore yuan rose to a five-month high, but last traded 0.3% lower at 6.9519 per U.S. dollar. U.S. and Chinese officials meet Saturday to review their Phase I trade deal.