Stalemate in the United States over automatic government spending cuts due to take effect March 1 and an inconclusive election in Italy undermined the euro on Thursday.
The price of oil fell, as investors sold off commodities with the stock market surging toward a record high.
Gold headed towards its longest run of monthly declines in more than 16 years, as an improved economic backdrop and lower inflation concerns continued to blunt its appeal to investors.
Asian stocks rallied on Thursday, with Japan's Nikkei leading gains as the Federal Reserve's steadfast support for an ultra-easy monetary policy and a successful bond auction in Italy lifted risk appetite in a volatile week for global markets.
The euro rose against the dollar for the first time in three sessions on Wednesday on relief over solid demand for Italy's first bond sale since the country's general elections.
The commitment to a stimulative monetary policy reiterated by Federal Reserve Chairman Ben Bernanke favored riskier assets over safe-haven U.S. debt, sending U.S. bond prices lower on Wednesday.
Gold fell 1 percent, nearly erasing all of the previous session's gains, hit by disappointment over a lack of new Federal Reserve stimulus and deflation worries over across-the-board deep U.S. spending cuts.
Brent crude oil futures settled at $111.87 a barrel, as investors weighed expectations that the Federal Reserve's stimulus program will be maintained against the sixth straight weekly rise in U.S. crude oil stockpiles.
European shares extended gains in the afternoon session on Wednesday, helped by a successful bond auction in Italy and the U.S. Federal Reserve's defense of its asset purchases on Tuesday.
U.S. stock index futures edged higher Wednesday following the durable goods orders report and ahead of Fed Chairman Ben Bernanke's second round of testimony, but ongoing worries over political deadlock in Italy kept a lid on gains.
Europe is still a very attractive market despite the current political and economic risks, David Rubenstein, co-founder & managing director of the Carlyle Group, told CNBC on Wednesday.
Asian shares rebounded on Wednesday to snap previous losses after Federal Reserve Chairman Ben Bernanke confirmed his commitment to monetary easing. However, Tokyo stocks bucked the trend as investors sold off exporter stocks on a rising yen.
Volatility calmed down Tuesday but brace yourself: Pros say bigger gyrations could be the norm for the next few weeks as investors watch what's going on in Washington and Europe.
The euro traded flat against the U.S. dollar and yen on Tuesday, recouping early losses with the help of U.S. central bank assurances that a bond-buying stimulus program will remain in place.
Brent crude oil fell to a one-month low — under $113 a barrel — on Tuesday as inconclusive Italian election results revived investor concerns about instability in the euro zone and threatened the outlook for fuel demand.
Gold rose 1.3 percent, its biggest one-day gain in three months, as Federal Reserve Chairman Ben Bernanke's defense of U.S. bond-buying stimulus boosted bullion's inflation-hedge appeal.
U.S. Treasurys briefly extended their losses on Tuesday on news of an unexpectedly big jump in U.S. consumer confidence and single-family home sales in January.
Euro zone shares sank to three month lows on Tuesday after an Italian election stalemate renewed concerns about the future of the euro zone.
U.S. stock index futures rose across the board following the upbeat S&P/Case-Shiller home price report and a day after the Dow and S&P 500 logged their worst one-day performance in 2013 amid worries about Italy's election result.
Asian stock markets tumbled on Tuesday, with Japan leading losses after a general election in Italy pointed to deadlock in parliament and raised fears of a new crisis in the euro zone.
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