The U.S. dollar lost its gains on Wednesday after the Federal Reserve raised its target interest rate by three-quarters of a percentage point to stem a disruptive surge in inflation.
The U.S. Dollar Currency Index, which tracks the greenback against six major currencies, was down 0.77% at $104.71.
The dollar had already been gaining ground in the past few months thanks to the Fed raising rates ahead of most other major central banks and has been given another leg up in recent weeks as investors seek safe havens, fearing the economic impact of rapidly tightening financial conditions.
But with such a large interest rate increase already expected, the dollar may struggle to gain further after the Fed's decision.
"Fed chair Jerome Powell will likely want to keep all options open for himself at tonight's press conference and provide little in the way of news," Commerzbank FX and EM analyst Antje Praefcke said in a note.
"That in turn would not constitute any additional fuel for the dollar bulls as market expectations have already gone a long way."
Higher U.S. rates versus rock bottom Japanese yields have been weighing on the yen, which hit a new 24-year low of 135.60 per dollar in Asia-Pacific trade.
It recovered in the course of the day amid volatility in government bond markets.