The low-yielding yen fell as upbeat earnings from technology bellwether Intel boosted appetite for riskier currencies while policy tightening by Singapore helped send the greenback lower across the board.
The euro and the Australian dollar climbed against both the US and Japanese currencies and the dollar index fell after the Monetary Authority of Singapore (MAS) tightened policy by effectively revaluing the Singapore dollar.
Markets took the move as a signal of the central bank's confidence in the economic outlook, as it also shifted policy to modest and gradual FX appreciation, and it revived speculation about when China might revalue the yuan.
The MAS decision also fed into positive risk sentiment already stoked by better-than-expected forecasts from Intel, which boosted technology stocks around the region, helping higher-yielding currencies and denting the yen.
"The dollar is being sold against Asia and that's extended to the majors," said Robert Ryan, FX strategist at BNP Paribas in Singapore.
"Risk-on is the order of day at least in Asia but I wonder how much the MAS influence will extend into Europe."
The euro climbed 0.4 per cent on the day to 127.34 yen, moving above its 100-day moving average at 127.03 yen and edging up towards resistance from a previous high at 128.
The Australian dollar also gained 0.3 per cent to 86.82 yen, although it remained short of a recent 18-month peak at 87.51 yen. The pound also gained 0.3 per cent.
The dollar was flat at 93.25 yen and fell 0.3 per cent on the index measuring its performance against six other major currencies to 80.257. It breached its 55-day moving average at 80.49 and was nearing a one-month low set on Monday.
"The Sing reweighting of the basket and appreciation stance is having a big impact on dollar/Asia with a lot of selling across the board," said a senior trader at a European bank in Hong Kong.
Speculation about when China might revalue was going to stay, he said. "It's just going to come and go in intensity."
"What Singapore did this morning just increases the pressure on China because the rationale for Singapore to allow currency strength is similar for why China should de-peg. It's domestic reasons rather than just external pressure," he said.
The Australian dollar rose 0.3 per cent to $0.9312, pushing through a psychological barrier at $0.9300 but failing to top a five-month peak just below $0.9400 set on Monday.
The euro, which is still enjoying a rebound stemming from short-covering after a rescue package for Greece at the weekend, rose 0.3 per cent to $1.3654, although it too hasn't made it through a high set on Monday of $1.3692.
The market is also awaiting a testimony by Federal Reserve Chairman Ben Bernanke on the economic outlook before the Joint Economic Committee of Congress. That is due at 1400 GMT.
There has been speculation he might use the forum to talk about normalising the spread between the fed funds and discount rates.
"There are rumours floating about that the chairman will use the testimony to provide more precise guidance on rate hikes, than the current "low-for-long" language," JP Morgan said in a note.
"We think these concerns are unlikely and he should reaffirm the Fed's current stance, helping US yields lower along with the dollar."
The New Zealand dollar bucked the trend and fell 0.3 per cent to $0.7115, after data showed a drop in retail sales during February. The patchy set of data prompted the market to push back chances of an interest rate hike in coming months.
Reuters