The dollar rallied for a second straight session on Wednesday as some calm returned to financial markets with Wall Street stocks firmer and European shares recouping some losses, all of which reduced the need to buy safe-haven currencies like the yen.
China's central bank ramped up its efforts to shore up sentiment, pumping $21.8 billion into the money market, a day after it cut interest rates and relaxed reserve requirements for some large banks.
In addition, an upbeat U.S. durables report boosted the dollar, although the data hardly changes the market's view that the Federal Reserve will likely delay raising interest rates given the recent market turmoil.
New York Fed President William Dudley on Wednesday further bolstered expectations of a delay in the Fed's rate increase. He said a September rate hike seemed less compelling than just a few weeks ago, although he added that "short-term" market volatility did not have significant implications for the U.S. recovery. The dollar pared gains against the euro and yen after his remarks.
"This is a resounding signal that the probability of the September rate hike has diminished considerably, as Dudley acknowledged the external risks," said Mark Luschini, chief investment strategist, at Janney Montgomery Scott in Pittsburgh.