Optimism about global economic growth boosted risk appetite and drove the U.S. dollar higher against the euro and Swiss franc on Wednesday, while the yen gained against the dollar after the Bank of Japan left monetary policy unchanged.
Expectations for the first Federal Reserve rate increase since 2006 have been pushed out to 2016, analysts reiterated, while the potential for more stimulus from the European Central Bank and Bank of Japan have also contributed to a backdrop of accommodative central bank policy.
That backdrop reassured traders that supportive central bank policies were unlikely to disrupt global growth.
"There's a risk-on environment," said Axel Merk, president and chief investment officer of Palo Alto, California-based Merk Investments. "People feel good." He noted that a holiday week in China had contributed to the greater appetite for risk.
Worries over a global slowdown led by China, the world's second-biggest economy, have been a key concern for investors.
The U.S. dollar benefited from the greater risk appetite and rose against the euro and Swiss franc, which traders tend to buy and hold during times of worry given their low yields and sell in times of greater risk appetite.
Concerns that a later Fed rate hike would limit investment flows into the United States capped the dollar's gains against the euro and Swiss franc, analysts said.
The dollar slipped slightly against the yen after the Bank of Japan left monetary policy steady despite talk the central bank would ease. The dollar was last down 0.24 percent against the yen at 119.950 yen.
"The fact that (the BOJ) didn't do anything probably helped the yen marginally," said Joseph Trevisani, chief market strategist at WorldWide Markets in Woodcliff Lake, New Jersey.
Commodity currencies such as the Australian and New Zealand dollars retained their recent momentum. The hit $0.7235, its highest in more than two weeks, while the New Zealand dollar hit its highest in over six weeks, at $0.6647.
The euro was last down 0.2 percent against the dollar at $1.12465. The dollar was last up 0.54 percent against the franc at 0.9733 franc. The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.07 percent at 95.54.
On Wall Street, the benchmark S&P 500 stock index was last up 0.56 percent.