SYDNEY The dollar drifted at three-week lows against a basket of major currencies early on Thursday, having fallen for a fourth session after minutes from the Federal Reserve's March meeting disappointed dollar bulls.
As a result, the dollar index has just about relinquished all of its gains made since the head of the U.S. central bank on March 19 suggested that interest rates may rise as soon as early next year.
It last stood at 79.527 .DXY, having dipped 0.3 percent on Wednesday to be well off a seven-week high of 80.599 set last Friday. So far this week, it has fallen over 1 percent.
Minutes of the March 19 meeting showed Fed officials had worried the bank's forecasts on interest rates might appear to investors as mapping out a more aggressive cycle of rate hikes.
Analysts at JPMorgan said the minutes were taken as dovish by markets, adding they "contained no record of a discussion as to how long it would take between the end of asset purchases and the beginning of rate hikes."
On March 19, the Fed said it would wait a "considerable time" after ending its asset-buying program before lifting interest rates.
Asked what the Fed meant by "considerable time", Janet Yellen said: "It probably means something on the order of around six months". Her comments had sent the dollar surging that day as investors quickly priced in the chance of a hike early in 2015.
Now, that rally has been almost completely unwound as markets have pushed back the timing of the Fed hike out to later in 2015.
The euro was back at $1.3855, having extended its recovery from a low of $1.3672 plumbed on Friday. A break above $1.3877 will take it to levels last seen on March 19.
Against the yen, the dollar fetched 102.09, holding near a three-week trough of 101.55 set on Tuesday. The euro climbed to 141.44 yen, continuing to regain ground lost earlier in the week.
Commodity currencies also extended gains on the greenback with the Australian dollar briefly popping above 94 U.S. cents for the first time since November.
It has retreated to $0.9374 and faces tough chart resistance around 94 cents, a level that had either hampered its rise or provided solid support over the past few years.
The next test for the Aussie is local jobs data due at 0030 GMT. Analysts expect a bit of a payback in April after an outsized jump in March, so any upside surprise could just be the catalyst needed for the Aussie to tackle the resistance.
Chinese trade data around 0100 GMT will also be closely watched with investors hoping to see some signs of a pickup in the world's second biggest economy after a slow start to the year.
Any disappointment in the Chinese numbers will either hit risk appetite or stoke speculation that Beijing will step up efforts to support the economy.
(Editing by Shri Navaratnam)