The dollar rose 1 percent versus a currency basket on Wednesday as financial markets pared back on riskier assets on dovish inflation and growth outlooks in the U.S. and the UK.

The dollar .DXY rose to 81.632, its highest level since July 30, with the latest move triggered by the Bank of England forecasting inflation to fall well below target in 2 years.

The dollar had already been rising as equity markets fell in the wake of the Federal Reserve's decision to invest proceeds from mortgage backed securities into government debt.