The dollar ended slightly weaker on Thursday as investors purchased euros and sold the US unit after the euro zone currency suffered several days of setbacks.
The market brushed aside earlier modest dollar strength after a sharp upward revision in the Federal Reserve's favoured measure of inflation for the fourth quarter of last year.
That indicated the central bank might not be patient about raising interest rates for as long as recently thought.
"The trading has been very featureless over the past couple of days. What we have seen is a liquidation of long European currency-trades against the dollar," said John McCarthy, director of foreign exchange at ING Capital Markets.
The euro was mostly steady at $1.2128 after touching the $1.22 session high, according to Reuters data.
The euro also climbed back from four-month lows of 128.25 yen to trade at 128.84, little changed from the previous trading day. However, the euro still looked vulnerable to ECB rate-cut speculation.
Hints on Tuesday and Wednesday by European Central Bank officials that an interest rate cut would not be out of the question if consumer spending failed to pick up remained fresh in investors' minds.
The dollar traded around 106.12 yen above the five-week nadir of 105.78 yen reached earlier in the session.
The yen was bolstered by data showing record foreign buying of Japanese stocks, in addition to upbeat growth figures and Standard & Poor's recent upgrade of Japan's outlook.
Earlier, the final revision of US fourth-quarter gross domestic product came in as expected, up 4.1 percent.
However, the core personal consumption expenditures, a measure of how much inflation is contained within consumer purchases, was revised to up 1.2 percent from the previous estimate of up 0.7 percent.
The news that inflation is running higher than previously thought raises the ante on US interest rates rising sooner than expected.
Higher rates would be beneficial to the US currency, which has been shunned for higher-yielding currencies.
Sterling tumbled to a 1-1/2 week low of $1.7993 after Bank of England Governor Mervyn King said the strong pound is hurting the British economy. The pound climbed back to $1.8073, still off 0.88 percent on the day.
The euro surged up from Wednesday's three week low of 66.40 pence to trade at 67.10 pence up about 1 percent.