The dollar hit a 14-month low on Tuesday due to a surge for growth- and commodity-linked currencies like the Australian and Canadian dollars on the back of record gold and higher oil prices.
Expectations for robust U.S. earnings results also supported risk-taking sentiment, which usually depresses the dollar.
"Generally, we are seeing a 'risk on' scenario," said Geoffrey Kendrick, currency strategist at UBS.
Gold rose above $1,065 an ounce and oil jumped one percent above $74 a barrel. The dollar and commodities are often inversely correlated, with gold and oil priced in dollars.
"Gold is essentially the antithesis of the dollar," said Neil Mellor, strategist at Bank of New York Mellon in London.
The dollar index, a measure of the greenback's value against six currencies, was down 0.4 percent at 75.752 .DXY after hitting 75.738 .DXY, its lowest since early August last year.
The euro rose to 13-month highs of $1.4872 as dollar-selling gained momentum, helping push it past option expiries at
$1.4850.
"The euro took a tumble on the back of a much weaker than expected German ZEW survey, though buyers quickly emerged lifting the euro back (above) the $1.4800 level," said Jane Foley, research director at Forex.com in London.
The think tank's October economic sentiment index came in at 56.0, lower than forecasts of 58.3 and down from 57.7 the previous month.
Traders also cited talk of central banks diversifying out of the U.S. dollar and into gold and euros.
FOCUS ON EARNINGS
The euro hovered near a six and a half month high against sterling of 94.10 pence after the release of unexpectedly soft UK inflation data.
Expectations of continued earnings improvements were seen keeping investor focus on so-called riskier assets to the detriment of the yen and the dollar.
"Risk perception remains an important topic in the absence of a cyclical trend out of the United States," said Michael Klawitter, currency strategist at Commerzbank in Frankfurt.
