American stocks have rallied after Federal Reserve chair Janet Yellen indicated a cautious attitude to low inflation, but also said the US economy is now strong enough to withstand a rate rise.
She admitted that it was unclear when inflation would pick up in response to a stronger economic outlook for the States, saying her committee would "be monitoring inflation developments closely in the months ahead".
After her remarks were made public, the dollar initially dropped to below the previous day's levels against the euro and fell against the yen. The currency was already on the backfoot following revelations regarding Donald Trump Jr's Russian emails scandal.
But investors saw a dovish tone in the statement, and were reassured by her comments that rates hikes would be gradual.
She added: "Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance."
The dollar later rebounded against the euro, trading near session highs against the common currency, as government bond yields in the euro area fell.
Meanwhile the Dow Jones added 126.14 points, rising 0.59 per cent.
However the pound rose for the first time in four days against the dollar on a combination of reactions to Yellen's speech and better than expected UK labour market data.