Concern over economic growth last week drove the dollar to its worst performance in more than four years.
TOKYO/SYDNEY: The dollar was broadly firmer on Thursday, having posted its biggest one-day gain in more than a month as an improvement in global sentiment led investors to trim bearish dollar positions.
A surprise policy easing by Singapore's central bank, citing a tougher outlook for economic growth, also boosted regional equities and gave the dollar a lift against that country's currency.
The greenback was up about 0.9 percent at 1.3631 Singapore dollars after the Monetary Authority of Singapore said it will set the rate of appreciation of the currency's nominal effective exchange rate (NEER) policy band at zero percent, starting on Thursday.
"The Singapore move was a surprise, so people jumped on the bandwagon to bid up the dollar," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
The index tracking the dollar against a basket of six major currencies was up 0.2 percent at 94.950, after rallying nearly 1 percent on Wednesday, while the euro edged down about 0.1 percent to $1.1265 from a six-month high of $1.1465 touched on Tuesday.
The dollar added about 0.1 percent against its Japanese counterpart to 109.41 yen, pulling well away from a 17-month trough of 107.63 set a few days ago.
"The dollar/yen might not go much higher for now because people are a bit knackered after covering short positions," said Global-info Co's Ogino, citing strong resistance at 110 yen.
The yen got no help from Bank of Japan Governor Haruhiko Kuroda, who said overnight in a speech in New York that the central bank was ready to expand monetary stimulus again if recent weaknesses in inflation expectations persist, stressing that there are "many ways" to do so to achieve his ambitious price target.
Kuroda made the remarks ahead of a meeting of Group of 20 financial leaders in Washington this week, where currency policy is seen high on the agenda in the face of subdued global growth.
The Federal Reserve has highlighted global uncertainty as the major bar to another hike in interest rates. So, when upbeat trade data out of China and a pick-up in commodity prices seemed to lessen the risk of a deeper world downturn, dollar bulls figured there was now more chance of a move.
Analysts at CitiFX said recent developments might serve as "foundational encouragement" for investors to warm up to the idea of pricing in more tightening.
Just this week, Richmond Fed President Jeffrey Lacker, San Francisco Fed President John Williams and Philadelphia Fed President Patrick Harker all suggested that several hikes were possible this year.
Fed funds futures are barely pricing in one hike this year, let alone multiple tightenings after recent dovish comments from core Fed members led by Chair Janet Yellen.
In an interview with Time magazine published on Wednesday, Yellen again highlighted a cautious approach to monetary policy, saying the U.S. central bank must try to avoid making "big mistakes".
An unexpected fall in U.S. retail sales in March supported Yellen's cautious approach. The disappointing data contributed to a fall in U.S. yields, yet it failed to dent the rallying dollar.
Similarly wary, the Bank of Canada warned of weaker global growth and a less favourable U.S. outlook as it held interest rates steady. It raised growth forecasts for 2016, but nudged them lower for 2017.
The dollar added about 0.2 percent to C$1.2842 against its Canadian counterpart.
Other commodity currencies also ceded ground to the greenback. The Aussie dipped below 77 U.S. cents after coming within a whisker of its 2016 peak of $0.7723.
Even a healthy labour force report failed to lift the Aussie. The unemployment rate fell to 5.7 percent, its lowest since late 2013.
For the rest of the market, the key focus will be on China's first quarter gross domestic product and March industrial output and retail sales due on Friday.
Investors will be looking for more signs of stabilisation in the world's second-largest economy, following Wednesday's upbeat trade data. - Reuters
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