The U.S. dollar slipped below a 13-1/2 month peak on Thursday, while the Chinese yuan recovered from its weakest level since January 2017 on news China and the United States will hold a new round of trade talks later this month.
The development between the world's two biggest economies offered hope for investors who have been rattled by tit-for-tat tariffs between Beijing and Washington this summer.
Still, doubts persist over whether the talks to be held on Aug. 21-22 would help the nations resolve their trade issues.
The dollar's stalling near its multi-month high came while President Donald Trump praised its recent strength on Thursday, even though he had said a strong greenback puts U.S. exporters at a disadvantage.
The ICE index that tracks the greenback against six major currencies fell as much 0.4 percent before ending 0.06 percent lower on the day at 96.637. It reached 96.984 on Wednesday, which was the highest since June 2017.
The yuan in offshore trading gained 1.1 percent to 6.8714 per dollar, rebounding from Wednesday's 6.9587, its weakest level since Jan. 4, 2017, EBS data showed.
Market optimism was also stoked by a further recovery in the Turkish lira, whose four-day plunge spurred a flight out of other emerging market currencies and touched off a selloff in the euro due to fears about European banks' exposure to Turkey.
Turkey's lira rose for a third straight day, gaining 2.4 percent to 5.8101 after Finance Minister Berat Albayrak's presentation to assure international investors.
The lira reduced its earlier gains after U.S. Treasury Secretary Steven Mnuchin said the United States is prepared to impose more sanctions on Ankara if detained American pastor Andrew Brunson is not released.
The lira's bounce on Thursday helped boost the Brazilian real and Mexican peso but did little for the Indian rupee and South African rand.
The euro was up over 0.1 percent at $1.13575, edging up from a 13-month low of $1.13010 set on Wednesday.
German Finance Minister Olaf Scholz told Albayrak on Thursday that Germany has an interest in an economically stable Turkey.
On Wednesday, Qatar pledged $15 billion in investments in Turkey, stoking the lira's recovery from a record low.
Concerns remain about President Tayyip Erdogan's policies to combat Turkey's double-digit inflation and his row with Washington over the release of Brunson.