Soft Chinese manufacturing data weakened the greenback as well by fueling talk the global economy faces headwinds and remains in need of monetary support.
Monetary stimulus measures, such as the Fed's USD85 billion bond-buying program, flood the economy with liquidity and drive down borrowing to encourage investing and job creation, weakening the greenback in the process.
In U.S. trading on Thursday, EUR/USD was up 0.59% at 1.2934.
Federal Reserve Bank of St. Louis James Bullard said earlier that the U.S. central bank wasn't "that close" to scaling back stimulus measures.
On Wednesday, Federal Reserve Chairman Ben Bernanke told Congress stimulus measure will stay in place though he added they would come up for review "in the next few meetings" if the labor market makes noted improvements.
Also on Wednesday, the Fed released the minutes of its two-day monetary policy meeting that began April 30, which revealed that some Fed authorities favored scaling back asset purchases as early as June, which strengthened the dollar until Bullard's comments rekindled talk that stimulus stays in place for now.
Soft manufacturing data out of China also convinced investors the world economy faces headwinds and will require continued monetary support.
A preliminary reading of China’s HSBC manufacturing PMI fell to 49.6 from a final reading of 50.4 in April, missing market expectations for a 50.5 reading.
The euro, meanwhile, enjoyed support on eurozone manufacturing and service-sector data.
The eurozone manufacturing purchasing managers’ index rose to 47.8 in May from a final reading of 46.7 in April, better than expectations for a reading of 47.0, though still below the 50 level that separates growth from contraction.
Germany’s manufacturing PMI rose to a two-month high 49.0 in May from 48.1 in April, beating expectations for a 48.5 reading.
The eurozone services PMI rose to 47.5 in May from 47.0 in April, above expectations for a reading of 47.2.
Back in the U.S., the Department of Labor reported earlier that the number of individuals filing for initial jobless claims last week fell by 23,000 to 340,000, better than expectations for a decline of 18,000 to 345,000.
Jobless claims for the preceding week were revised up to 363,000 from a previously reported increase of 360,000.
A separate report showed that U.S. new home sales rose by 2.3% to 454,000 units in April, defying expectations for a decline to 425,000.
The greenback, meanwhile, was down against the pound, with GBP/USDtrading up 0.38% at 1.5107.
In the U.K., official data revealed earlier that the U.K. economy expanded by 0.3% in the first quarter and expanded 0.6% from the same period year earlier, unchanged from preliminary estimates and both figures in line with expectations, which gave the pound support.
The dollar was down against the yen, with USD/JPY down 1.19% at 101.92, and down against the Swiss franc, with USD/CHF trading down 0.96% at 0.9690.
The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.61% at 1.0305, AUD/USD up 0.43% at 0.9742 and NZD/USD trading up 0.89% at 0.8148
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.66% at 83.81.
On Friday, the U.S. is to unveil government data on durable goods orders.
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