The U.S. dollar dropped against its major counterparts in the European session on Wednesday, as investors awaited the minutes of the Federal Reserve's December meeting for more clarity on the monetary policy outlook.

The Fed minutes due to be released later in the day could offer more signals on the trajectory and pace of rate hikes in the future.

The Institute of Supply Management will publish manufacturing PMI for December at 10 am ET. The PMI is expected to ease to 48.5 from 49 in November.

The benchmark yield on the 10-year treasury note fell to 3.7 percent. Yields move inversely to bond prices.

The dollar index that tracks the greenback against a basket of other currencies dropped to 103.83.

The greenback eased to 129.93 against the yen, off an early 5-day high of 131.47. On the downside, 120.00 is possibly seen as its next support level.

The greenback was down against the pound, at a 5-day low of 1.2087. Should the dollar falls further, it is likely to test support around the 1.22 region.

Extending early decline, the greenback fell to a fresh 3-week low of 0.6886 against the aussie. The greenback is likely to test support around the 0.72 level.

The greenback edged down to 1.0635 against the euro and 0.9253 against the franc, after rising to 1.0540 and 0.9367, respectively in early deals. Next immediate support for the currency is seen around 1.10 against the euro and 0.90 against the franc.

The greenback weakened to 1.3542 against the loonie and 0.6353 against the kiwi, reversing from its early highs of 1.3680 and 0.6239, respectively. The next possible support for the greenback is seen around 1.30 against the loonie and 0.66 against the kiwi.

U.S. ISM manufacturing PMI for December is set for release in the New York session.

The Fed minutes from the December 13-14 meeting will be published at 2:00 pm ET.

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