The dollar fell against major currencies on Wednesday, with US interest rates seen on hold in the near future even if the Federal Reserve does eventually resume the tightening campaign which it halted this week.
The yen slid to record lows against the euro and eight-year troughs against sterling on yield differentials, although comments from the Chinese central bank helped the Japanese currency trim losses.
The Fed left rates at 5.25 percent on Tuesday, saying its previous spree of rate rises should help moderate inflation over time even though risks of a pick-up in price pressures remained.
"It's a general trend towards a weaker US dollar as a result of last night's interest rate decision which looked to see the Fed remaining on hold for the foreseeable future," said Kris Bernie, market economist at National Australia Bank.
"There are some upside risks there in that the Fed has retained a tightening bias, but ultimately many people are seeing the Fed's decision last night as the end of the tightening cycle and as a result interest rate differentials moved away from the US and to other countries' favour."
The day's biggest mover was the high-yielding New Zealand dollar, which rallied one percent to a two-month of high US $0.6315 by 1116 GMT. The euro gained 0.5 percent to $1.2895, moving back up towards last week's two-month peak of $1.2909. The dollar was also a third of a percent softer at 115.13 yen.
Against a basket of currencies, the dollar eased to 84.47, within reach of a two-month low of 84.39 hit in early August. The euro rose as high as 148.34, its highest since the single currency was launched in 1999. The yen hit an eight-year low against sterling for the fifth day in a row, at 220.13 yen.
The Bank of Japan is seen holding rates at 0.25 percent on Friday after raising them for the first time in six years last month. Even another rate hike by year-end would leave Japanese yields far below those of other major economies, meaning the yen remains an attractive funding currency.
"The yen remains the worst performing G10 currency in the last week and month against the dollar and euro, perhaps as the search for yield leaves the yen looking very unattractive," Royal Bank of Canada said in a note to clients.
Nonetheless the yen trimmed some losses after Japanese machinery orders leapt, underscoring how capital spending is helping to drive Japan's economic expansion.