The dollar drew support on Wednesday from a survey showing U.S. business pulling out of a five month contraction, while the Australian dollar strengthened on the likelihood of interest rate hikes after a surprisingly strong inflation print.
The dollar index =USD , which measures the greenback against a basket of six peers, was steady at 106.17, rebounding from a one-month low of 105.35 struck during the previous session.
S&P Global on Tuesday said its flash U.S. Composite Purchasing Managers Index, tracking both the manufacturing and service sectors, rose to its highest level since July, potentially giving the U.S. Federal Reserve more room to keep interest rates high.
The buoyant dollar kept the yen pinned near the closely watched 150 threshold, with the Japanese currency JPY=EBS last at 149.84 per dollar, having mostly traded sideways over the past month and keeping traders on their toes for any signs of intervention by Japanese authorities.
Pressure is mounting on the Bank of Japan to change its bond yield control as global interest rates rise. A hike to an existing yield cap set just three months ago is being discussed as a possibility in the run up to next week's policy meeting, sources said earlier this week.
The Aussie AUD=D3 gained as much as 0.7% to touch a roughly two-week high of $0.6400 on Wednesday after data showed the country's consumer price index rising 1.2% in the third quarter, above market forecasts of 1.1% and up from a 0.8% increase the previous quarter.
That left traders narrowing the odds on a possible rate increase by the Reserve Bank of Australia (RBA) next month, which would come after four rate pauses.
"The RBA's November meeting is likely to be live, and the cash rate to be hiked to 4.35%. And I suspect it will be a hawkish hike," said Matt Simpson, senior market analyst at City Index.
In the broader market, the U.S. dollar held to most of its gains against the euro, after the single currency EUR=EBS slid 0.75% in the previous session on data which showed the euro zone's business activity took a surprise turn for the worse this month.
The euro EUR=EBS was last 0.13% higher at $1.0602. "The euro zone economy is kind of entering a recession, so this economic playout stiffens expectations that the European Central Bank might have (reached a) peak in interest rates," said Tina Teng, market analyst at CMC Markets.
"By contrast, the U.S. Federal Reserve could continue to raise interest rates just because the economic data looks strong."
Elsewhere, sterling GBP=D3 rose 0.13% to $1.2175, while the New Zealand dollar NZD=D3 gained 0.1% to $0.58505.
In cryptocurrencies, Bitcoin BTC=BTSP was last 0.21% higher at $33,988, holding near a roughly 18-month high hit on Tuesday.
The world's largest cryptocurrency has been on a tear this week, having surged 10% on Monday, fuelled by mounting speculation that an exchange-traded bitcoin fund is imminent.
"A growing spot ETF market would invariably mean a growing market across most of the cryptocurrency landscape," said John Glover, chief investment officer at crypto lender Ledn.
"If Bitcoin is being purchased for ETFs, the price will rise ... there is a very real possibility that the launch of one or more spot ETFs could lead to the next major bull run in the entire cryptocurrency ecosystem."
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