The USD fell against most major currencies as market players consolidated recent gains driven by upbeat US data, expectations of Fed easing and concerns over the US government shutdown.
At 9.30am, the US Dollar Index (DXY) was at 97.368, down 0.02% since it opened in early trading on Wednesday in the Asian session.
The US House of Representatives approved a bipartisan deal on Tuesday to end the partial government shutdown, easing concerns about disruptions to public sector operations and the impact on the economy.
The US dollar has remained strong in recent times following President Donald Trump's nomination of Kevin Warsh as the next Federal Reserve (Fed) Chairman.
Markets view Warsh as a hawkish candidate who is likely to keep interest rates high for longer, reducing expectations of a rate cut in the near term.
Investors are also focusing on the January job openings and employment report, which are expected to be important indicators of the direction of the US economy and the Fed's monetary policy outlook. However, the release of the data was delayed due to the partial government shutdown.
Market sentiment is currently more cautious towards the dollar and US Treasury bonds, as risky assets are back in favor as investors' risk appetite increases.
Meanwhile, Richmond Fed President Tom Barkin said that previous interest rate cuts have helped stabilize the labor market as the Fed tries to address the final phase of inflationary pressures.
Productivity gains are also seen helping businesses curb costs and reduce inflation, but the duration of the effectiveness of these factors is still a question mark.
US manufacturing sector data showed an encouraging recovery, with the manufacturing PMI rising to 52.6 last month, the highest level since August 2022, thus signaling a return to growth.
Globally, geopolitical tensions are showing signs of easing after the US reached a trade deal with India and announced that nuclear talks with Iran would resume.
