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The dollar nursed broad losses early on Wednesday as investors cut crowded long positions in the lead-up to the US Thanksgiving holidays, and amid heightened geopolitical tensions after Turkey downed a Russian warplane.
It was one of the most serious publicly acknowledged clashes between a NATO member country and Russia for half-a-century and prompted President Vladimir Putin to warm of "serious consequences''.
"I was a bit worried yesterday. So far Russia seems to be taking a "grown-up'' attitude, which was good but the market may remain a bit anxious,'' said Takako Masai, head of market research at Shinsei Bank in Tokyo.
dollar index
The dollar index slid 0.1 per cent to 99.415, recoiling from an eight-month peak of 100.00 set on Monday. Against the yen, the greenback dipped to a 1-1/2 week low of 122.27 and has last stood at 122.31.
Investors generally shrugged off data showing the US economy grew at a healthier clip in the third quarter than initially thought, an outcome that supported the case for the Federal Reserve to hike interest rates next month.
"Robust US domestic demand growth remains the main driver of US economic activity and justifies a December Fed funds rate increase. Still, we expect the Fed's tightening cycle to be gradual which will limit significant USD upside,'' said Elias Haddad, senior currency strategist at Commonwealth Bank.
The euro rose as far as $1.0676, and last traded at $1.0667, up 0.2 per cent from late US levels.
commodity currencies
Commodity currencies also fared well, thanks in part to rebound in oil prices.
The Canadian dollar strengthened to C$1.3306 per US dollar , pulling well away from Monday's trough of C$1.3436 per dollar.
The Australian dollar hit a one-month high of $0.7276 and last stood at $0.7265, up 0.2 per cent from late US levels.
It was already bid after Reserve Bank of Australia Governor Glenn Stevens, had in a speech late on Tuesday, dampened the expectations for further rate cuts.
"With euro zone bond yields plunging to negative, there are not many countries that have two-year yields of around two percent in the developed world,'' said Shinsei Bank's Masai.
"So I suspect the Aussie cannot weaken much and this is why the currency is getting revaluated."
The Aussie also hit a 4 1/2-month high against the euro of A$1.4626 per euro.
Ahead of the Thanksgiving holiday on Thursday, a run of US economic data will be published on Wednesday, including durable goods orders, personal consumption, initial jobless claims and house prices.
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