Investors pared back safe-haven bids on dollar and yen on Monday after the U.S. government unveiled a plan to unlock toxic assets from banks' balance sheets in an effort to pull the economy out of recession.

Against the dollar, the single currency surged to as high as 1.3737 after European Central Bank chief Jean Claude Trichet signaled in a newspaper interview published on Monday that ECB remained wary of interest rate falling to zero. In late New York afternoon trading, the euro rose by 0.5 percent to 1.3631 while sterling jumped in tandem with euro and posted 0.8 percent gain to 1.4574 versus the dollar. Other higher-yielding currencies such as the Australian and New Zealand dollars gained sharply by 3 percent and 2.5 percent to session highs of 0.7060 and 0.5728 respectively on the back of rallies in U.S. stock markets as Treasury Secretary Timothy Geithner outlined details of the bank rescue plan.

On the other hand, the Japanese yen fell 1.2 percent versus U.S. dollar to 97.35 and downed by 1.7 percent to a five month low of 132.56 against the euro. Other currencies also strengthen versus the yen, the British pound hit a 3-1/2-month-high at 141.85 yen while the Australian dollar rose to 68.54 yen, its highest since November 2008.

The U.S. stocks rallied on Monday, with Dow Jones industrial average gained nearly 7 percent, or 497 points to 7,775 while Standard & Poor’s 500 index and Nasdaq Composite index also surged by 7 percent to 822 and 1,555 respectively.

On Tuesday, economic data release includes BOJ Monetary Policy report minutes for February, German PMI manufacturing and PMI service, eurozone current account, PMI manufacturing and PMI service, U.K. CPI data and RPI data, and U.S. house price index. ECB President Jean-Claude Trichet will speak at conference in Mexico city on ‘Financial crisis and commodity prices – Economic implications and policy responses’ at 23:00GMT, BOE Governor Mervyn King will testify before the U.K. House of Commons Treasury at 09:30GMT, and Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Timothy Geithner will testify at the House Financial Services Committee on the government’s rescue of American International Group Inc. at 14:00GMT.