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 With signs it will hold off on more monetary easing for the moment,
the Bank of Japan also added to the trend. The yen rose to its
strongest in a month before steadying.
The euro, up more than 6 percent against the dollar since April 13,
pushed to a two-month high of $1.1249 in morning trade in Europe
before steadying around $1.1200.
A low reading of U.S. first quarter growth capped a poor run of
economy numbers on Wednesday and the Federal Reserve's policy
meeting was also seen confirming it will hold off again with any
interest rate rise.
The scenario that has driven the dollar higher over the past year -
that the United States is ready for a first rise in rates in almost
a decade - is not yet dead. But with other major economies
struggling, there are growing doubts.
"We still see this as a correction to the dollar's rise over the
last year but near term it probably has further to run," said Ian
Stannard, head of European FX strategy at Morgan Stanley in London
"A move up into the $1.15 area is definitely not out of the
question. It will need some strong data surprises in favor of the
dollar to turn this around."
The Bank of Japan, whose steady campaign of money printing has
knocked more than a fifth off the value of the yen in two years,
held off with another round of easing on Thursday and said it was
confident inflation would begin to rise. That prodded the yen to as
high as 118.50 in early trade in Europe.
"They have cut their inflation forecast but they still expect
inflation to start rising in the second half of the year," said
Manuel Oliveri, a strategist with Credit Agricole in London. "That
says to me that monetary policy expectations remain stable and yen
should hold in a range going forward."
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The dollar last traded at 118.94 yen <JPY=>, down 0.1 percent on the
day.
The other big losers were the New Zealand and Australian dollars,
both shedding around 1 percent in response to signs of more monetary
easing in the pipeline from their respective central banks.
Dealers said the Aussie had been knocked back by an article in
sister papers the Sydney Morning Herald and The Age predicting the
Reserve Bank would cut rates next week, in contrast to signals last
week from Governor Glenn Stevens.
The kiwi last traded at $0.7614, down 0.9 percent on the day and
retreating from a three-month high of $0.7744 set on Wednesday. The
Aussie fell 1.2 percent to $0.7912.
(Editing by Jon Boyle)
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