A rally in the euro was reinforced by dollar losses, prompted by reports that U.S. President Donald Trump disclosed highly sensitive intelligence information to senior Russian officials at a meeting last week.
The U.S. Dollar Index measures the strength of the greenback against six main currencies.
Optimism over pro-growth economic policies under Trump helped drive a sharp rally in US stocks after the November 8 USA election.
At 10:46 a.m. ET (1446 GMT), the Dow Jones Industrial Average was down 234.47 points, or 1.12 percent, at 20,745.28, the S&P 500 was down 24.18 points, or 1.01 percent, at 2,376.49 and the Nasdaq Composite index was down 83.65 points, or 1.36 percent, at 6,086.22. The latest from the New York Times and alleges that Trump in February asked the then-director of the Federal Bureau of Investigation to "let go' an investigation into Trump's former-National Security Adviser Michael Flynn". The S&P 500 financial sector tumbled more than 2 percent, led by losses in Bank of America and JPMorgan. Apart from the sell-off in the futures market, the United States dollar was also hit, losing ground against the Japanese yen and euro. Coherus shares rose almost 7 percent to $23.55.
The dollar fell after the poor housing data and despite USA manufacturing production recording its largest increase in more than three years. Though the White House has denied the allegation, there's mounting unease in markets over the developments in the US government.
Analysts said the controversy around Trump has raised fears that he might not last a whole term and that, even if he did, there were too many distractions for him to be able to successfully push through his economic stimulus programme.
The S&P 500 was on track for its worst day since September.
Oil prices strengthened on Wednesday ahead of US crude inventory data that could give investors a clue as to whether an OPEC-led output cut is making progress in reducing a persistent global supply overhang.
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The dollar index fell 0.77 percent, with the euro up 1.06 percent to $1.1089. The Shanghai Composite Index edged 0.2 percent lower to 3,104.44.
All three major US stock indexes were down more than 1 percent.
The euro held firm at $1.1086, having hit a six-month high of $1.10975 on Tuesday, as it also drew support from solid economic data in the euro zone.
As reported at 11:04 am (BST) in London, the USD/JPY was trading at 112.332 Yen, down 0.64%; the pair had earlier hit a low of 112.254 Yen while the session peak holds at a distant 113.156.
The 10-year Treasury yield sank toward 2.20 percent in its steepest decline since the day after the Brexit vote. USA gold futures gained 0.56 percent to $1,236.90 an ounce.
Brent crude was up 1.6 percent at $52.49 per barrel, while USA light crude rose 1.4 percent to $49.34. Spot gold rose for a fifth day and was up 1.8 percent at $1,258.38 an ounce.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.6 percent to its highest level since June 2015. The Nikkei Stock Average slipped 0.5% from Tuesday to 19,814.