The dollar recovered lost ground against the yen on Wednesday after a sharp sell-off the previous day as investors sought to buy at cheaper levels while remaining focused on central bank stimulus.
Uncertainty on when the U.S. Federal Reserve will pare back its ultra-loose monetary policy weighed on the dollar in early European trade, but traders said investors were buying it at lower levels headed into New York trade given the U.S. economy was in better shape than the euro zone and Japan.
Deleveraging, monetary policy and positioning have been driving markets. "Today, markets are retracing some of the losses suffered in the last few sessions," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.
"Increasingly, monetary policy appears to have reached its limit in terms of stimulus," she said, noting that the Fed appears to be moving towards stepping out of quantitative easing while the BOJ has aggressive policy in place, but is not eager to add.