The dollar rose against the euro and the yen after the Federal Reserve on Tuesday acknowledged gains in the U.S. economy and offered few clues on the chances for further monetary easing, and equities also rose on data that supported optimism on the global economy.
Fed policymakers said the job market had improved but unemployment remains high, reiterating its expectation that interest rates would remain near zero until at least late 2014.
The key takeaway is that the Federal Reserve's outlook on the U.S. economy has improved, specifically on the labour market. although the Fed remains guarded, said Richard Franulovich, senior currency strategist at Westpac in New York. That said, the Fed's comments seem to suggest that QE3 is off the table for now and that is probably boosting the dollar.
The dollar climbed 0.79 percent to 82.91 yen, notching an 11-month high against the Japanese currency. The euro sank 0.41 percent to $1.3099, after earlier touching a near one-month low.
U.S. Treasury debt extended losses, with 30-year bonds trading over a point lower in price immediately after the Fed released its policy statement.
Benchmark 10-year notes were trading 15/32 lower in price to yield 2.09 percent, up from 2.03 percent late Monday. The notes had been trading 12/32 lower in price just prior to the release of the statement.
Global equities were also boosted by data showing that U.S. retail sales in February marked their biggest gains five months and a monthly index from German think-tank ZEW showed analyst and investor sentiment on the economy had risen more than expected.
The S&P 500 index rose to its highest level since June 2008, and the Nasdaq Composite hit its highest mark since December 2000.
The Dow Jones industrial average <.DJI> gained 127.00 points, or 0.98 percent, to 13,086.71. The Standard & Poor's 500 Index <.SPX> gained 13.05 points, or 0.95 percent, to 1,384.14. The Nasdaq Composite Index <.IXIC> gained 33.56 points, or 1.12 percent, to 3,017.22.
The FTSEurofirst 300 index <.FTEU3> of top European shares finished 1.69 percent firmer at 1,095.34 points, the highest close since late July.
(Additional reporting by Nick Olivari; Editing by Leslie Adler)