The legislation called for slashing the corporate tax rate to 20 percent from 35 percent and reducing the number of tax brackets for individuals, according to a summary document obtained by Reuters.

Analysts said the proposals put forth were both unlikely to gather sufficient support in Congress and unlikely to have significant impact on the US economy. "Massive" tax cuts had been a major campaign promise of US President Donald Trump.

"The market believes that the likelihood of tax reform passing quickly is diminished," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange. "... the market believes that it's not enough to be meaningful. It's doubtful that it'll be meaningful for the overall GDP of the country."

Cutting taxes would increase spending, drive inflation and US interest rates higher, and make the dollar more attractive. If the tax cuts fail to pass or do not provide incentive for increased spending, they would not support a stronger dollar.

The dollar index fell to 94.411, its lowest since Oct. 26. It had earlier risen, almost touching its highest level since mid-July.

The euro hit its highest level in a week against the dollar, rising to $1.1687.

The dollar also hit a session low against the Japanese yen after the tax cut proposal's release, falling to 113.55 yen.

The greenback largely held its gains against the British pound, which fell more than 1 percent after the Bank of England raised interest rates for the first time in more than a decade but said it sees only gradual rises ahead.

The BoE said its nine rate-setters voted 7-2 to increase its benchmark Bank Rate to 0.50 percent from 0.25 percent, but it expected only "very gradual" further increases would be needed over the next three years.

The pound initially rose on the announcement, climbing to as high as $1.3279 GBP=D3, from around $1.3215 beforehand.