The dollar was generally weaker Tuesday afternoon after the Federal Reserve kept its key interest rate near zero and signaled rates would remain extraordinarily low for an extended time.
Even though the Fed noted increased momentum in the economy's recovery, speculation that rates will stay at a record low for months drove the dollar closer to parity with its Canadian counterpart.
Kansas City Federal Reserve Bank President Thomas Hoenig dissented for a second month, suggesting that policy makers should begin to consider hiking rates.
The dollar struggled throughout the session, falling sharply versus the sterling after US new residential construction showed a notable decrease in the month of February, according to a report released by the Commerce Department on Tuesday.
Analysts say the data was impacted by unusually bad winter weather in the Northeast.
The report showed that housing starts fell 5.9 percent to an annual rate of 575,000 in February from the revised January estimate of 611,000.
The dollar eased to 1.3730 versus the euro, moving 3 cents from a 9-month high of 1.3434 set 2 weeks ago.
European finance ministers have reportedly worked out a strategy for emergency loans to Greece, in case the country's $6.6 billion tax hikes and wage cut plans fail. Standard & Poor's affirmed the nation's credit ratings.
The buck dropped to 1.5215 versus the sterling, hitting its lowest since March 1, the day it jumped to a 9-month peak near 1.4800.
Meanwhile, the dollar edged closer to parity versus the loonie, slumping to a 19-month low of C$1.0133.
Canadian manufacturing sales rose much more than expected in January, with official data showing the largest gains in energy and base metals products. With this gain, sales have advanced for five consecutive months.
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