The dollar jumped one percent against a basket of major currencies on Tuesday and recovered from seven-month lows against the safe-haven yen and euro as riskier assets got a boost from an interest rate cut by the Chinese central bank.
China's central bank cut interest rates and lowered the amount of reserves banks must hold for the second time in two months on Tuesday, ratcheting up support for a stuttering economy and a plunging stock market that has sent shockwaves around the globe.
The dollar advanced on Monday, rising against a basket of currencies for the third straight session, as traders focused on potential U.S. interest rate hikes and shook off worries about a China-led "currency war."
China's central bank said on Thursday there was no reason for the yuan to fall further given the country's strong economic fundamentals, helping to restore calm to jittery global markets after it devalued the currency earlier in the week.
China devalued its currency on Tuesday after a run of poor economic data, a move it billed as a free-market reform but which some suspect could be the beginning of a longer-term slide in the exchange rate.