SINGAPORE: The dollar rallied Wednesday after comments by two regional Fed officials stoked speculation the US central bank could consider raising interest rates next month.
A sell-off in global stocks on fears of a slowing world economy is also leading traders to flee higher-yielding, riskier, investments sending emerging market currencies tumbling.
At around 0615 GMT, the dollar was trading at 107.14 yen having touched 18-month lows at 105.50 yen on Tuesday.
The euro dipped to $1.1483 after hitting an eight-month high of $1.1616 Tuesday. The single currency was also at 123.04 yen against 122.71 yen in New York.
The greenback, which has tumbled about 13 percent against the yen this year, enjoyed a pick-up after Atlanta Fed President Dennis Lockhart on Tuesday called a June rate increase "a real option".
Also, San Francisco Fed chief John Williams said he would lend support to a hike if the US economy continued on its recovery track.
There had been doubts US central bank policymakers would raise interest rates next month after data last week showed consumer spending rose only slightly in April, with slower economic growth in the first quarter of 2016.
A well-below-forecast reading on US manufacturing activity for April compounded the problems and raised concerns about the recovery in the world's top economy.
Dealers are awaiting the release on Friday of US non-farm payrolls data, another barometer of the health of the world's biggest economy and which could give a clue on the Fed's next moves on interest rates.
Some analysts said September would be the earliest for the Fed to hike rates, if at all this year.
IG Markets analyst Bernard Aw said: "We are still sceptical of a June Fed hike, although it is plausible that Fed officials would want to prepare the markets for one in the second half of the year."
The Australian dollar recovered to rise 0.19 percent against the greenback after a shock interest rate cut by the country's central bank on Tuesday. The Aussie had fallen almost three percent in two days.
The US unit also surged 1.26 percent against the South Korean won and 0.43 percent against Indonesia's rupiah, while the New Zealand dollar dipped 0.25 percent.
The oil-dependent Malaysian ringgit shed 1.44 percent as oil prices remain weighed down by a stronger dollar and oversupply woes.
The dollar also rose against the Philippine peso, Taiwan dollar, the Thai baht and the Chinese yuan.
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