The dollar hit its lowest level in more than five months against a basket of currencies on Thursday and was set to post its biggest quarterly percentage loss in more than five years after traders continued to digest dovish comments from Federal Reserve Chair Janet Yellen.
The euro continued four straight sessions of gains against the dollar and hit $1.1411, marking the first leap above $1.1400 in 5-1/2 months. The dollar index .DXY, which measures the greenback against a basket of six major currencies, hit 94.319, its lowest level since mid-October.
The index was on track to post a quarterly loss of more than 4 percent, the largest since the third quarter of 2010. The euro was set to gain about 4.8 percent to mark its biggest quarterly gain in five years.
The dollar was set to decline about 6.5 percent against the yen for its la rgest quarterly drop since the third quarter of 2009.
Analysts said traders continued to push out expectations for the next Fed interest rate increase on Thursday. Yellen said Tuesday the central bank would proceed cautiously in raising rates and highlighted external risks such as slower global growth.
"It was a pretty big statement," said Win Thin, currency strategist at Brown Brothers Harriman in New York, in reference to the continued negative impact of Yellen's speech on the dollar. "A lot of people were taken off guard."
Analysts also said month-end rebalancing flows weighed on the dollar. These flows are caused by global portfolio managers adjusting their existing currency hedges.
The Labor Department will release a much-anticipated U.S. nonfarm payrolls report for March on Friday. A sharp increase in wages could stem the dollar's losses and suggest the U.S. economy is heating up, said Boris Schlossberg, managing director at BK Asset Management in New York.
"The only thing that could push the Fed into more hawkish territory is if they see wage price inflation," Schlossberg said.
U.S. nonfarm payrolls are expected to show employers added 205,000 jobs in March. Average earnings, seen as signaling inflation trends, are expected to rise by 0.2 percent. ECONUS
(Reporting by S am Forgione; Additional reporting by Anirban Nag in London; Editing by Jonathan Oatis and Nick Zieminski)