The US dollar was down as risk tolerance rose after the Reserve Bank of Australia gave an upbeat assessment of the economic outlook for Asia and the domestic economy. Adding to that a lackluster report on business activity in the US service sector added to selling pressure on the dollar on fears of further slowdown in the US economy.
Boris Schlossberg, a director for currency research at GFT Forex in New York said: "Risk appetite staged a strong turnaround. Although Australian monetary officials acknowledged the fact that global growth was slowing, they nevertheless remained positive regarding economic activity in the Asia Pacific."
The dollar fell against the yen and the euro after the Institute for Supply Management said its measure of the US non-manufacturing sector rose in June for a sixth straight month, but the rate of growth was the slowest since February.
The euro rose 0.7 percent to $1.2621. The euro was high against sterling, rising to 83.41 pence.The dollar was last down 0.3 percent at 87.48 yen.