The US dollar sank against its rivals on Thursday, putting it on track for its biggest two-day drop in a year after the Federal Reserve signalled it was ready to cut interest rates as early as next month.
The Fed joined global peers such as the European Central Bank and the Reserve Bank of Australia this week in signalling that more policy stimulus is needed to maintain growth. That fuelled a rally in higher-yielding currencies such as the Australian dollar and the Korean won.
"Certainly the market has taken this as a dovish turn and as a reason to sell dollars," said Lee Ferridge, head of macro strategy for North America at State Street.
"The theme of the day is going to stay with the dollar under pressure."
The dollar fell 0.43% against a basket of its rivals to 96.70, putting it on course for its biggest two-day losing streak since February 2018.
It also retreated to a six-month low against the Japanese yen at 107.45, though it had retraced some of those losses early in the North American session.
The sharp fall in the dollar took currency markets by surprise and forced some hedge funds that had built up large long-dollar bets before the rate decision to dump the greenback.
The widespread dollar weakness boosted appetite for risk-oriented currencies, with the euro barreling past the $1.13 line to a one-week high while the Australian dollar and the New Zealand dollar gained more than 0.5% each.
Although the dollar looks weaker in the short term, some investors were skeptical the trend would last.