The dollar fell to low levels on Wednesday after falling overnight with a surprise weaker inflation reading in the United States that reinforced bets that the Federal Reserve (central bank) had reached the end of its monetary policy tightening cycle.
At the same time, the offshore Chinese yuan received some support after domestic industrial production and retail sales growth exceeded expectations.
Overall, the activity data appears to be further evidence of very slow progress in the Chinese economy, said Rob Carnell, head of research for the Asia-Pacific region and chief economist at ING.
The yuan rose briefly overseas, hitting a three-month high of 7.2385 against the dollar, before retreating slightly to $7.2477.
At the same time, bleak news continued to flow from China's real estate sector, with official data showing sales falling at a faster pace in October and investment declining.
With no end in sight to the problems in the sector, Carnell said, it is likely to trickle down to other parts of the Chinese economy.
The New Zealand dollar rose to a one-month high of 0.6029 against the dollar.
Intense selling of the dollar led to a rise in many of its counterpart currencies, with the euro remaining close to the highest level in more than two months that it recorded on Tuesday.
The feverish activity in the currency market was sparked by data showing US consumer prices were unchanged in October, with annual core inflation rising at the slowest pace in two years.
In the 12 months through October, the consumer price index rose 3.2 percent, below economists' estimates, after rising 3.7 percent in September.
The data led market participants to expect that the US Federal Reserve would not raise interest rates again at the monetary policy meeting in December.
The dollar index, which measures the currency's performance against a basket of currencies, recorded the latest reading at 104.14, which is not far from the lowest level in two months that it recorded on Tuesday at 103.98.
As the dollar fell, the euro settled near $1.08725 after touching its highest levels since August the previous day.
The British pound recorded $1.2489, approaching levels last seen in September.
The US currency's overnight decline provided some support to the weak yen, which rose from a new one-year low recorded on Monday at 151.92.
The dollar against the yen recorded a slight increase to 150.68, as data revealed a contraction in the Japanese economy in the period from July to September, which complicates the central bank’s efforts to gradually exit its ultra-loose monetary policy.
