News that China and the United States had extended trade talks in Beijing for an unscheduled third day boosted oil prices and broader sentiment. Expectations of more easing in China helped the mood as well, with Asian and European shares rallying. "As long as you don't see a situation where there is a negative turn much like what we saw over the last quarter, markets will probably view any trade development, even if they're not concluded by the March 1 deadline, with modest optimism just because it reduces the downside risk to the outlook," said Mazen Issa, senior FX strategist, at TD Securities in New York.
In mid-morning trading, the dollar index fell 0.6 percent to 95.341, after sliding to a three-month trough. The euro rose 0.9 percent to $1.1537, while sterling gained 0.7 percent versus the dollar to $1.2797. Europe's single currency briefly gave up gains after disappointing trade data out of Germany and a fall in consumer confidence in France.
The Australian dollar, a barometer of sentiment toward China, was up 0.7 percent at US$0.7190. The Aussie has bounced off near-decade lows below $0.68 reached earlier this month.