With US rates much higher than those of G10 peers, and therefore the scope for them to fall much wider, investors are reversing out of the dollar.
"Rate cut expectations have gained momentum and US rate expectations are falling a lot more than they are in the euro zone," said Thu Lan Nguyen, an analyst at Commerzbank.
Whether or not the dollar retreats further depends on economic data on the coronavirus's impact on confidence and trade outside of China, Nguyen said.
Against the euro, the dollar fell to a three-week low, hovering just below that at 1.099, down 1.02% on Thursday afternoon. The dollar index dropped 0.658% to 98.463, having earlier fallen to its weakest since February 6.
It has shed roughly 1% since last week, when it touched a near three-year high thanks to its safe-haven currency credentials and investors' belief that the US economy was relatively sheltered from the coronavirus fallout. But the currency's safe-haven appeal has worn off.
One-month volatility in euro/dollar, which was near record lows, has shot up to its highest since early October.
New coronavirus infections are now growing faster outside China than within, stoking fears that the economic impact on supply chains and consumer demand might be far greater than previously anticipated.
Investors have rushed for the safety of US government debt. Ten-year US Treasury yields slumped for the third consecutive day to a record low of 1.241%.
The dollar dropped 0.52% to 109.84 Japanese yen as the yen's safe-haven appeal began to return.
China's offshore yuan strengthened to a one-week high, with the dollar down 0.18% at 7.008 yuan per dollar. The Australian dollar, seen as a proxy for investor sentiment towards China, rebounded 0.6% to $0.658, away from 11-year lows touched on Wednesday.