The US dollar fell further at the opening of the European session after being hit by US inflation data that eased in March.
US consumer prices unexpectedly fell to 5% last month, a sharp decline from the 6% recorded in January.
This led the market to reinforce expectations that the Federal Reserve (Fed) will raise rates by 25 basis points at next month's meeting before halting the hike.
However, analysts also did not rule out the possibility that the central bank would halt hikes at its May policy meeting.
Investors' next focus is now on the release of US producer inflation (PPI) data and jobless claims in the New York session.
At the start of the European session, the dollar index, which measures the strength of the greenback, traded lower at around 101.30.
Following the greenback's decline, the euro climbed higher to a new 2-month high against the US dollar.
The pound also surged to a 10-month high against the US dollar, shrugging off dismal gross domestic product (GDP) data in February.
Meanwhile, the Aussie and New Zealand dollars also recorded gains despite the weakness of the US dollar, while the Aussie dollar also benefited from a stronger-than-expected Australian jobs data reading.
The Canadian dollar continued to trade stronger with support from the continued strengthening in crude oil trading.
