The U.S. dollar weakened against most major currencies on Wednesday amid speculations that the Federal Reserve may soon taper its monetary easing measures.
As recent data pointed to stable recovery of U.S. economy, worries that the Fed is likely to scale back its quantitative easing measures intensified and dragged down U.S. stocks on Wednesday.
In the previous session, the Dow Jones Industrial Average Index posted record closing high after data showed U.S. consumer confidence hit a five-year high and the annual growth of U.S. home prices in March touched a seven-year high.
Fed Chairman Ben Bernanke said last week in testimony to the Congress that "if we see continued improvement, and we have confidence that that is going to be sustained, in the next few meetings we could take a step down in our pace of purchases."
The greenback slipped sharply against Japanese yen and Swiss Franc as demand for safe-haven assets increased while equity market retreated.
However, analysts believe the dollar's pullback will be limited as U.S. economy is expected to continue to improve.
The Organization for Economic Cooperation and Development (OECD) on Wednesday predicted that U.S. gross domestic product will grow 1.9 percent this year and 2.8 percent in 2014, while Japan's GDP will expand 1.6 percent this year and 1.4 percent in the next year and eurozone's GDP will contract 0.6 percent in 2013 and grow 1.1 percent in 2014.
In late New York trading, the euro rose to 1.2935 dollars from 1.2875 dollars of the previous session and the British pound increased to 1.5124 dollars from 1.5063 dollars. The Australian dollar slipped to 0.9635 dollars from 0.9640 dollars.
The dollar bought 101.15 Japanese yen, lower than 102.08 yen of the previous session. It edged down to 0.9633 Swiss francs from 0. 9733 and went down to 1.0356 Canadian dollars from 1.0385 of the previous trading day.