The dollar declined across the board (except the Japanese yen) as an unexpected rise in U.S. pending home sales and fading worries about Dubai's debt problems boosted demand for higher-yielding assets. The National Association of Realtors reported that U.S. pending homes sales increased by 3.7% in October, much higher than economists' forecast of a decrease of 1%, however, ISM manufacturing index fell to 53.6 in November from 55.7 in the prior month. Earlier, news indicated that the Dubai World planned to restructure $26 billion debt, half the size initially expected.

Despite intra-day brief fall to 1.4970 in Asia, euro rebounded from there in line with the dollar's broad-based weakness following the BOJ's post-meeting announcement, which contained no mention of intervention to sell the yen. The single currency's rise accelerated in European morning on the news from Dubai World and eur/usd hit a session high of 1.5118 in New York morning. Similar to euro, the British pound found good buying interest at 1.6393 and rallied to 1.6647 in tandem with euro in New York trade.

Dollar rose to as high as 87.54 against the Japanese Yen in Asia afternoon on news that the BOJ would hold an emergency meeting, the greenback later retreated sharply on cross buying in yen after the central bank introduced a 3-month fixed rate lending operation with a size of 10 trillion yen (BOJ left interest rates unchanged at 0.1%).

Earlier, aussie retreated after the RBA hiked interest rates by 25 b.p. as widely expected, which led to profit taking. In the accompanying statement, the central bank offered no clear indication as to what move would be made at the next meeting in February. Aud/usd rallied to 0.9271 in New York afternoon on the rise in U.S. equity markets. DJI rose its highest close in 14 months to 10,471, up 1.23% or 126 points.

Data to be released on Wednesday include U.K. construction PMI, eurozone PPI, U.S. ADP employment and Fed's beige book.