The greenback rose against the Japanese yen on Tuesday as the release of better-than-expected U.S. housing data in February encouraged investors to take on more risk while plans by the Bank of Japan to buy up to 1 trillion yen ($10.2 billion) subordinated loans raised fears the central bank would flood the market with yen. The dollar surged to a session high of 98.98 before easing as investors took profits ahead of BOJ rate decision and was last up 0.4 percent at 98.60 yen.

Stock markets in U.S. jumped on Tuesday as an unexpected leap in housing starts pushed Home Depot and other retailers higher while bullish comments form a broker on Cisco Systems buoyed technology shares. The Dow Jones industrial average gained 178 points, or 2.48 percent to end at 7,395. The Standard & Poor’s 500 surged 3.2 percent to 778 and Nasdaq Composite index rallied by more than 4 percent to 1,462.

The positive sentiment had pushed the euro higher against the dollar and the pair rose above 1.3000 for a second straight day, last trading up 0.4 percent at 1.3016. The single currency also strengthened versus the yen and gained 0.8 percent, trading at 128.34 in late New York session.

In other currency, the British pound shed by 0.1 percent versus dollar and last traded at 1.4045 while the Australian dollar and New Zealand dollar flatten at 0.6618 and 0.5300 respectively.

Traders are waiting any fresh impetus could come at the end of the Federal Reserve's two-day policy meeting on Wednesday, particularly if the U.S. central bank, which has cut benchmark interest rates to zero, announces plans to buy long-dated Treasuries to keep long-term rates low.

On Wednesday, economic data release includes Australia Wespac leading index, Japan leading indicator and BOJ rate decision, Switzerland’s retail sales, U.K. Bank of England meeting minutes, Claimant count, Average earnings and ILO unemployment rate, Canada Wholesale sales figure, U.S. CPI data, Current account, Real earnings, Midwest manufacturing and Fed rate decision at 18:15GMT.