A newspaper report said Italy's Economy Minister Giovanni Tria was "ready to leave" before a spokeswoman for the ministry denied that the minister planned to quit.
The euro slipped to a one-week low on Thursday, unsettled by reports of a row in Italy's new government as it prepares to present its first budget targets.
Italian daily La Stampa said Economy Minister Giovanni Tria "was ready to leave," before a spokeswoman for the ministry denied that the minister planned to quit.
The euro fell roughly 0.4 percent to as low as $1.1690 , its weakest since September 20.
Some market participants attributed the euro's drop to a report by the Corriere della Serra that the budget meeting scheduled for 1600 GMT was likely to be delayed.
"The euro selling accelerated on headlines that suggested that Italy's budget meeting could be delayed," said Kyosuke Suzuki, director at Societe Generale in Tokyo.
Thanks to the euro's slip, the dollar index against a basket of six major currencies stood 0.35 percent higher at 94.519.
Otherwise, the dollar had stayed range bound as a boost from a well-anticipated US Federal Reserve interest rate hike quickly faded, and US Treasury yields eased.
The dollar was little changed at 112.685 yen, having slipped from a two-month peak of 113.145 touched on Wednesday.
Junichi Ishikawa, senior FX strategist at IG Securities, said the dollar had gone on the defensive against the yen due to declining Treasury yields and weaker equities.
Having raised rates three times this year, the Fed still foresees another rate hike in December, three more next year, and one increase in 2020.
It also dropped a reference in its statement to the word "accommodative", although Fed Chairman Jerome Powell later said policy was still accommodative. The Fed has gradually raised rates since late 2015 from a near-zero level.
Long-term US Treasury yields pulled back from four-month highs of 3.11 percent scaled earlier in week.