The U.S. dollar hit its highest in more than six weeks against the yen on Wednesday as traders digested the possibility of ultra-long U.S. bond issuance, and after strong U.S. services sector growth kept hopes alive for a Federal Reserve interest rate increase in June.
In a move largely expected in financial markets, the policymaking Federal Open Market Committee (FOMC) unanimously agreed later Wednesday afternoon to keep its benchmark rate target at 0.75 percent to 1 percent.
Adjustments from previous statements indicated that Fed officials judged at this week's two-day meeting that "economic activity slowed" while "household spending rose only modestly."
The dollar index, which measures the greenback against a basket of six major rivals, climbed slightly higher on this news, nearing the $100 mark.
The Institute for Supply Management (ISM) also said Wednesday its index of non-manufacturing activity rose to 57.5 in April from 55.2 the month before. The reading was above expectations of 55.8 from a Reuters poll of economists and dealt some relief to investors after a recent run of weak U.S. economic data.
"The market is getting excited about the possibility of a 50-year bond," said Kathy Lien, managing director at BK Asset Management in New York.
The dollar at one point hit 112.60 yen, its highest since March 21. The euro dipped 0.27 percent against the dollar to $1.0897 after touching a 5-1/2-month high of $1.0950 last week.
The ISM data boosted optimism that the Fed will hike rates in June despite weak first-quarter U.S. gross domestic product growth and inflation data.
"The stronger services growth was consistent with the U.S. economy turning the corner in Q2, so that's helping to strengthen the argument for the Fed to raise rates around the middle of the year," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
Manimbo also said solid U.S. private payrolls data helped reinforce expectations for a strong April U.S. non-farm payrolls report this Friday. ADP said Wednesday that private employers expanded their payrolls by 177,000 jobs last month.
While that was the smallest gain since last October, it roughly matched expectations of economists surveyed by Reuters, who had forecast the report would show a gain of 175,000 jobs.
Manimbo added that the euro was weaker partly on uncertainty ahead of a televised debate between France's presidential rivals on Wednesday.
The dollar index, which measures the greenback against a basket of six major rivals, was last up 0.26 percent at $99.25.
—CNBC's Jeff Cox and Lauren Thomas contributed to this report.