In the US services industry, activity eased in April from a record level in March, likely due to shortages of inputs amid a burst of demand, data from the Institute for Supply Management showed.
The dollar index, which measures the greenback against a basket of peer currencies, was last at 91.262 after rising as high as 91.436 earlier in the session, its highest since April 19.
The dollar's bounce on Tuesday put pressure on the euro, which dropped once again below the $1.20 mark on Wednesday, hitting its lowest against the buck in over two weeks.
The dollar index, which measures the greenback against a basket of peer currencies, rose as high as 91.436, its highest since April 19.
The consumer price index jumped 0.6% last month, the largest gain since August 2012, after rising 0.4% in February, the Labor Department said on Tuesday. Excluding the volatile food and energy components, the CPI rose 0.3%. The so-called core CPI nudged up 0.1% in February.
The dollar briefly spiked on the data, before reversing course and dipping to three-week lows. Treasury yields also fell after the data.
The greenback has generally risen at the same time as stocks gain. Investors are now watching to see if that relationship continues as it may indicate a shift in how the currency responds to improving risk appetite.
"The trickiest thing for markets right now is to figure out what the dollar's sensitivity is to good US economic news," said Erik Nelson, a macro strategist at Wells Fargo in New York.