Awaiting the release of US inflation data, the US dollar continued to trade at a 20 -year high despite recording a slight decline in the European session.
Investors are now more cautious in positioning following expectations that the US inflation rate in April is likely to display a slight decline from previous readings.
Most major currencies including the euro took advantage of this opportunity to post slight gains, which it also drew support from the hawkish statements of some European Central Bank (ECB) policymakers.
ECB President Christine Lagarde said the first interest rate hike would take place any time after the asset purchase program ended and after the first hike, the normalization process would be done gradually.
Luis de Guindos, meanwhile, expects inflation to remain at 4% to 5% by the end of the year, signaling that there is potential for a rate hike by the ECB.
Meanwhile, commodity-linked currencies also showed a recovery with the Aussie dollar and kiwi each rising from the lows they touched in the previous session.
Even so, investors remain wary of the current movements displayed in the market as there is key data to be released in the later New York session.
At the time of writing, the dollar index is trading lower at 103.40 against most major currencies.
