The dollar fell more than a cent from the previous session's two-month high against the euro on Wednesday as traders locked in profits.
With little news hitting the screens, investors booked trading gains amid concerns the rally might have gone too far.
Federal Reserve Chairman Alan Greenspan stoked such concerns on Tuesday when he failed to mention the threat of inflation while he talked about soaring oil prices.
"Greenspan did not sound the inflation warning alarms on account of oil so maybe some profit-taking evolved from there," said Peter Fontaine, currency strategist at KBC in Brussels.
"Some people in the market are looking at what has been done and thinking that a bit of profit-taking wouldn't hurt," he said.
By 0600 EDT, the euro fetched around $1.2889, up a quarter percent from late New York trade. It hit a two-month low just below a key support level of $1.2800 on Tuesday.
The dollar bought around 108.35 yen, 0.2 percent less than late in New York and compared with 5-month highs near 109 set on Tuesday.
Greenspan speaks for a second time this week at 0930 EDT when he testifies on regulatory reform of government-sponsored enterprises before the Senate Banking Committee.
"I think the dollar's still in a strengthening period. We've seen quite a bit of profit-taking in the past 24 hours, particularly against the yen but I think it will be short-lived," said Adam Myers, foreign exchange strategist at Societe Generale in London.
"The reforms will encourage more foreign investment into (U.S.) agency debt we think, so you could get a positive run on the dollar following his comments," Myers said.