The euro, which on Monday hit a five-week high above $1.07 on the expectation that the European Central Bank is moving towards winding back its stimulus programme, inched down to $1.0644, with dovish comments from ECB officials adding to a cautious mood.
"Expectations for a hawkish dot plot was a factor that has pushed up the dollar recently, with hopes for the number of times the Fed could hike rates this year having increased to four from three".
US long-dated and benchmark Treasury yields edged lower on Tuesday after a drop in oil prices was viewed as a deflationary sign, but the drop in yields was limited as investors awaited the Federal Reserve's policy statement on Wednesday.
The 10-year yield was at 2.5402 percent, from its last close of 2.524.
But the Fed's policy-setting committee did not flag any plan to accelerate the pace of monetary tightening. Futures indicate that Japanese stocks are set to weaken as the yen strengthens ahead of a Bank of Japan policy decision Thursday. Hong Kong's Hang Seng index rode the positive regional trend, staying on track to log a 3.4 percent gain for the week, its biggest since September.
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Earlier, the pan-European STOXX 600 index .STOXX gained 0.4 percent, helped by energy .SXEP and basic resource stocks .SXPP .
Aided by stronger oil, Wall Street was cautiously firmer around mid-session in NY, with the Dow edging up around 0.3 per cent. The Nasdaq was flat, while the Dow and the S&P 500 posted losses.
European markets edged higher on Wednesday despite some caution surrounding the Dutch election outcome.
"There is not a lot for the (eurozone) region today.so any political news out of the Netherlands might be its main driver".
The euro, which touched its highest level in 5-1/2-weeks early on Friday, hovered near that level at $1.0773, after two days of strong gains. It fell as much as 0.7 percent against the euro to 87.85 pence, it was last trading at 87.48 pence per euro. Sterling traded hit low at $1.2110 before recovering to $1.2151 by 20:20 GMT. The Bank of England, the Swiss National Bank, Bank Indonesia and the Turkish central bank are also expected to stand pat. In contrast, commodity prices were unable to make any headway which curbed support.
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US crude climbed 0.2 percent to $48.84 a barrel, set to end the week 0.7 percent higher.
"Policymakers did not accompany the rate hike with the hawkish signals many market participants may have expected and as such, the US dollar plunged and continued lower during Chair Yellen's press conference [before recovering Thursday]", said Charalambos Pissouros, senior analyst with IronFX Global.
The pound was 0.2 percent lower at $1.2267 after jumping 1.1 percent overnight.
Seoul advanced 0.8 percent, Sydney ticked up 0.2 percent and Singapore was 0.8 percent higher, while there were also big gains in Wellington, Taipei, Jakarta and Manila.
NC Unemployment up in January
January unemployment rates fell in 205 of the nation's 388 metropolitan areas, rose in 147 areas and were unchanged in 36. Despite the uptick, the rate of unemployment was still lower than the region's 4.2 percent unemployment rate a year ago.