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That view was reinforced on Tuesday as Fed Governor Lael Brainard said the central bank would need to roll out more stimulus to help the economy overcome the coronavirus and fulfil the Fed's new pledge.
U.S. Treasury yields fell following the speech as additional stimulus would likely involve more aggressive bond-buying.
The euro benefited from the initial dollar sell-off, as it rose high as $1.2014 on Tuesday, its highest since May 2018.
The common currency later reversed those gains to sit at $1.19095. Against the Japanese yen, the dollar was little changed at 105.75 yen.
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Also supporting a rebound in the greenback, U.S. Treasury Secretary Steven Mnuchin said on Tuesday he would telephone House Speaker Nancy Pelosi about stalled coronavirus aid negotiations later in the day. White House chief of staff Mark Meadows said Senate Republicans are likely to bring up a targeted COVID-19 relief bill next week.
Among antipodean currencies, the Australian dollar changed hands at $0.73845, while the New Zealand dollar traded at $0.6764.
Elsewhere in the market, Sterling traded at 1.3422, just below last year's high that followed the 2019 election of 1.3516.
The Chinese yuan was little changed, last up down 0.03% in offshore markets to 6.8266
