The dollar extended losses Wednesday as traders ramped up bets on the Federal Reserve cutting interest rates in the new year after officials sounded optimistic notes on the battle against inflation.
However, equity markets were mixed following another tepid performance on Wall Street, with focus on the release of the central bank's favoured gauge of prices coming up later in the week.
A string of indicators in recent weeks has indicated the US jobs market is softening and the economy slowing down -- but not quickly enough to cause much concern about a recession.
That has encouraged investors to shift back into risk assets, though the latest advance has been tempered by profit-taking ahead of what many hope will be a "Santa rally".
Data shows traders are now betting the Fed will cut rates in June, while they have priced an 80 percent chance of such a move in May, according to Bloomberg News.
Billionaire investor Bill Ackman, founder of Pershing Square Capital Management, has said there could even be one as early as the first quarter.
His comments came as Fed Governor Christopher Waller, usually one of the more hawkish members, struck an upbeat tone in a speech Tuesday.
"I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to two percent," he told the American Enterprise Institute in Washington, referring to the bank's target.
"I am encouraged by what we have learned in the past few weeks -- something appears to be giving, and it's the pace of the economy."
His counterpart Michelle Bowman said she would support more hikes if the data suggested they were needed but was much more conditional in her assessment than in the past.
The more dovish comments, combined with falling yields and rate expectations has dragged on the dollar, and it extended losses Wednesday.
It was sitting at its weakest level since September against the yen, while it was at a near four-month low versus the euro and sterling.
It was also off against most other units including the South Korean won, Australian dollar and South African rand.
"The latest round of dovish Fed comments, which open the door to rate cuts in 2024, follows cautious comments from Fed officials in early October, which we noted as the start of the pivot," Tony Sycamore, at IG Australia, said.
"In my 30 years in markets, I have not seen a central bank come close to executing such a well-timed pivot, punctuated by a patch of softer inflation and labour market data."
Still, some analysts pointed out that Fed officials have alluded to higher Treasury yields acting as a substitute for further rate hikes, making it easier to pause, but falling yields were taking away that crutch.
Equity markets struggled for traction ahead of the week's key data release -- the personal consumption expenditures (PCE), which is the Fed's preferred guide for inflation.
Tokyo, Sydney, Seoul, Wellington, Taipei and Jakarta all rose, but Hong Kong, Shanghai, Seoul and Manila slipped.
That came after another unremarkable day on Wall Street, even as data showed US consumer confidence rose more than expected this month and a separate report pointed to healthy sales over the five-day shopping weekend that includes Black Friday.
Tokyo - Nikkei 225: UP 0.1 percent at 33,450.32 (break)
Hong Kong - Hang Seng Index: DOWN 1.1 percent at 17,156.51
Shanghai - Composite: DOWN 0.2 percent at 3,032.15
Dollar/yen: DOWN at 146.82 from 147.50 yen on Tuesday
Euro/dollar: UP at $1.1013 from $1.0994
Pound/dollar: UP at $1.2724 from $1.2698
Euro/pound: DOWN at 86.55 pence from 86.56 pence
West Texas Intermediate: UP 0.6 percent at $76.86 per barrel
Brent North Sea crude: UP 0.3 percent at $81.96 per barrel
New York - Dow: UP 0.2 percent at 35,416.98 (close)
London - FTSE 100: DOWN 0.1 percent at 7,455.24 (close)
