The greenback posted steep losses against the yen, which has fallen about 3.2 percent over the last seven days.
The dollar fell for the first time in seven days against a basket of currencies on Wednesday, as investors consolidated gains and booked profits on a day with no major U.S. economic data and in which global stock markets were retreating.
The greenback posted steep losses against the yen, which has fallen about 3.2 percent over the last seven days. The Japanese currency's recent losses had halted its run of gains which had propelled it to 18-month highs versus the dollar early this month.
"The dollar's bias hasn't meaningfully brightened given deep market skepticism in the Federal Reserve firing an interest rate hike in the near future," said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington.
"Consequently, the foggy outlook for a Fed rate hike risks undercutting dollar rallies."
In addition, stemming the yen's gains was a series of warnings from Japanese Finance Minister Taro Aso that the government would intervene in the currency market. Koichi Hamada, an economic adviser to Prime Minister Shinzo Abe, was the latest to sound a market alert on the yen.
Analysts believe Japan will be wary of intervening to offset flows of money into the yen before it hosts a G7 meeting this month, but Tokyo is clearly unhappy with a 14 percent rise in the currency since December.
In mid-morning trading, the dollar index, which tracks the greenback against a basket of six other currencies, shed 0.4 percent to 93.879, moving away from a two-week high of 94.356 set overnight.
Against the yen, the dollar was down 0.7 percent at 108.55 yen after climbing to a two-week high of 109.37 yen in Asian trading.
The euro, meanwhile, rose 0.5 percent against the dollar to $1.1425.
Western Union's Manimbo said key to the dollar's performance will be the April and May data on retail sales and consumer sentiment due for release on Friday. Forecasts showed a supposed pickup in both reports which would be consistent with views about an economy recovering after a first quarter slump.
"Any disappointing outcomes would suggest a longer slump for the economy which would keep the Fed at bay, and the dollar at risk of revisiting recent lows," Manimbo said.