The peso extended overnight gains to touch an eight-day high against the dollar after Powell said on Wednesday that US rates were "just below" a so-called neutral level, leading to bets that a rising trend in US rates may be coming to an end.

Investors also shrugged off a warning from Mexico's central bank on Wednesday about the incoming leftist government's policies sparking a loss of confidence in the country.

The Chilean and the Colombian pesos gained as hopes of moderation in the pace of US interest rate hikes boosted appetite for risky assets, including emerging markets.

"The risk of Fed hikes has been dialed back in the wake of Powell's comments," said Koon Chow, FX strategist at UBP in London, adding that emerging market currencies have the benefit of trading at cheap levels.

The Brazilian real also gained for a third straight session, reversing earlier losses and building on increases spurred by its central bank's sale of repurchase agreements to improve liquidity in the foreign exchange markets.

Analysts pointed to volatility as traders sought to influence the month-end Ptax rate that is used as a benchmark for futures contracts.

An advance in the real was also capped by concern about a delay in the Senate vote on a future offshore oil auction that could raise an estimated 130 billion reais ($33.90 billion).

Senate President Eunice Oliviera said on Wednesday the so-called transfer of rights bill was facing resistance from the current government as a proposal to split the proceeds with states could violate a government spending cap.

Brazil's main stock index Bovespa rebounded after initially opening lower, helped by an 8 percent jump in Brazilian toll road operator CCR SA after it announced a deal with Sao Paulo prosecutors to pay 81.53 million reais ($21.20 million) to settle a case against its subsidiaries.