The dollar weakened against other major currencies on Thursday as U.S. Treasury yields fell and traders lowered their expectations for the Fed's interest rate hikes at a time of weak economic data and market volatility.
U.S. benchmark 10-year bond yields hit a three-month low of 2.826% and fell more than five basis points to 2.867% in late trading.
The euro rose 0.26% to $1.1373 against the dollar.
"The problem facing the dollar is actually lower yields on U.S. Treasuries and lower expectations for Fed interest rate hikes," said Shaun Osborne, chief foreign exchange strategist at Banco.
It is widely expected that the Federal Reserve policymakers will raise interest rates again at their December 18-19 meeting, but the focus of the market is on the number of interest rate increases in 2019.
According to CME Group's FedWatch tool, the trend of interest rate futures implies that traders currently expect the Fed to raise interest rates no more than once in 2019, compared with two possible increases a month ago.
The dollar has been under pressure this week as the U.S. Treasury yield curve has been partially inverted, warning of a possible recession in the economy.
"There is growing concern about the overall trajectory of the U.S. economy," said Eric Viloria, foreign exchange strategist at Credit Agriculture Bank of France.
Some of the concerns stem from the slowdown in global economic growth, he said.
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