The dollar index, which measures the currency against a basket of six majors, rose as high as to 96.143, its highest level since August 9, before falling back to 96.062, up 0.50 percent on the day.
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Deutsche boss John Cryan poured cold water on a tie-up, but said more bank mergers were needed in Europe. Fischer added in an interview on Tuesday that the USA job market is almost at full strength.
That reversal saw the dollar, which was at around 100.500 yen at the start of the week, extend an overnight rally as far as 103.230 yen, its highest since July 29.
But a report that undershoots expectations could see the rate-hike probability drop below 15% and the dollar weaken, he said.
While downside risks remain for the dollar in the run-up to the November election, a smaller sample of strategists who answered an extra question said the USA currency would benefit most if Democratic Party candidate Hillary Clinton is voted president.
His comments followed a relatively hawkish speech by Fed Chair Janet Yellen, which has raised expectations the US central bank is moving closer to an interest rate hike.
The “natural” rate of interest – the real rate consistent with full use of economic resources and steady inflation near the Fed’s target level – was near zero and would rise to only 1 percent over the next decade.
“With many negatives in the price already, we doubt that GBP will drop through recent lows against Dollars and Euro”, wrote Valentin Marinov, head of G10 FX strategy at CA-CIB, in a note to clients.
The Dow Jones industrial average was last down 49.04 points, or 0.27%, at 18,453.95.
Attention has switched to Friday’s US August non-farm payrolls report and with it a chance to assess whether the US economy is robust enough to withstand monetary tightening.
Viraj Patel, a currency strategist at ING, said the data were likely to support the dollar heading into Friday’s session, though ADP’s number has shown little correlation with the Labor Department’s figure in recent months. Meanwhile, US$1,354 is seen as a key resistance.
The S&P 500 index (BA) traded down 6 points, or 0.3%, at 2,174.
Movers and shakers: Shares of Apple slipped 1% after the European Union antitrust regulator’s allegation that the company’s tax arrangement with Ireland allowed it to pay substantially less tax than other businesses over many years. Crude oil futures continued to slip after ending down for a second straight day on Tuesday, on worries of oversupply and a strong dollar.
Brent crude was last down 60c, or 1.22%, at $48.66 a barrel.
The U.S. dollar will rise modestly in the year ahead with risks skewed to the upside on renewed speculation that the Federal Reserve will raise interest rates soon, according to foreign exchange strategists polled by Reuters. It is set to end the month 10.5 percent higher.
Hershey dropped 11.2 percent to US$99.19 after Mondelez abandoned its pursuit to buy the chocolate maker on Monday.
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Yen bulls were also kept in check after Japan’s Chief Cabinet Secretary Yoshihide Suga told Reuters on Tuesday that the government will respond “appropriately” to unwelcome yen gains.
