The USD index was little changed at 99.80 as of 7:57 AM after falling to its lowest level in about six weeks.
Most Asian currencies rose on Wednesday, as the US dollar held near a six-week low. The Indian rupee held its ground after the Reserve Bank of India left interest rates unchanged, as expected by the market.
The dollar was pressured by easing tensions in the Middle East, as hopes for renewed diplomacy between the US and Iran weighed on oil prices.
The rupee continues to rise ahead of the RBI decision.
The Reserve Bank of India left its benchmark repo rate unchanged at 5.25% on Wednesday, citing rising inflation, global uncertainty, and robust domestic economic growth, while maintaining a neutral policy stance. The six-member Monetary Policy Committee (MPC) voted unanimously to keep the interest rate unchanged.
The central bank attributed the recent acceleration in inflation primarily to rising food and fuel prices, adding that core inflation remains broadly subdued.
The Indian rupee continued to strengthen, with the USD/INR pair down 0.3% to 95.06 rupees, also helped by a sharp drop in oil prices.
The rupee has recovered nearly 2% from recent lows amid a sharp retreat in Brent crude over the past two sessions amid optimism surrounding diplomatic efforts between the US and Iran.
Yen holds after intervention
The USD/JPY pair (the Japanese yen) fell 0.2% to 157.5 per dollar, holding steady after a sharp drop late last week following coordinated yen-buying intervention by Japan and the US—the first such joint action in decades. The measure eased pressure on the currency after it fell to a 40-year low. US Treasury Secretary Scott Bessent said Washington would do "whatever it takes" to support the yen and ensure orderly currency markets.
Regional currencies generally benefited from the dollar's weakness.
The South Korean won's USD/KRW pair fell 0.4%, while the Singapore dollar's USD/SGD pair fell 0.1%.
The Chinese yuan's USD/CNY pair fell 0.1% domestically. A private survey released Wednesday showed that China's services sector expanded at its slowest pace in 10 months in July amid weak domestic demand.
The Australian dollar's AUD/USD pair rose 0.1%.
Oil prices fell for a third straight session on Wednesday after Qatar announced it was preparing an interim proposal as part of mediators' efforts to align the positions of Washington and Tehran. Market attention will turn to US nonfarm payrolls data later this week, which could influence expectations about the Federal Reserve's next move.