In early afternoon deals, the greenback sank sharply versus the pound, euro and yen, as official data showed US inflation eased to an annual rate of 7.7 percent in October.
The pound jumped 1.9 percent to $1.1574 and the euro rallied 0.8 percent to $1.0092.
“Inflation has finally started to drop like a rock in the US and this is the best news that anyone can expect,” said AvaTrade analyst Naeem Aslam.
“The Fed will still continue to increase the interest rate but there is no need to be aggressive about this — which means that the pace of interest rate hike will slow down now.”
The data was published one week after the US central bank unveiled a fourth straight 0.75-percentage-point increase as expected — the sixth hike this year to cool rampant prices.
The Fed however also warned last week that rates would go higher than previously expected in its fight against decades-high inflation.
