The safe-haven dollar hovered near a one-month low on Thursday amid improving risk appetite after minutes of the Federal Reserve's May meeting confirmed the potential for a pause in rate hikes after two more half-point increases in June and July.
The dollar index, which measures the currency against six major peers, was little changed at 102.03, consolidating around that level after a short-lived bounce immediately after the minutes on Wednesday.
But the move fizzled as the Asian trading day got underway, with analysts saying there were few surprises in the minutes. Wall Street rallied overnight, while long-term Treasury yields held steady.
Atlanta Federal Reserve President Raphael Bostic had already suggested earlier this week that a pause might be the best course of action in September to monitor the effects on the economy following two more 50-basis-point hikes in June and July.
"A soft DXY backdrop is forming, with risk appetite firming," Westpac strategists wrote in a client note, referring to the dollar index.
"It's still too early to call a long-term DXY peak though," they added. "DXY could range for a bit, but retracements into the 101 level are a buy."
The dollar index reached a nearly two-decade peak above 105 mid-month, but signs that aggressive Fed action may already be slowing economic growth have prompted traders to scale back tightening bets, with Treasury yields also dropping from multi-year highs.
The 10-year Treasury yield ticked up in Tokyo to 2.76% but has mostly just consolidated around that level this week.
The dollar was little changed at 127.325 yen, while the euro edged up 0.14% to $1.06955, buoyed by European Central Bank chief Christine Lagarde's comments early in the week flagging an end to negative interest rates in the eurozone in the third quarter. That sent the single currency to a one-month high of $1.0748 on Tuesday.
Sterling was flat at $1.2584. The Aussie slipped 0.07% to $0.7082.
The New Zealand dollar edged lower to $0.6474, after shedding most of the gains following Wednesday's hawkish Reserve Bank of New Zealand meeting outcome, which had lifted it to a three-week top of $0.6514.