The dollar extended gains against the yen in Asian trade Wednesday after the US Federal Reserve announced an unprecedented rescue package for troubled insurance giant AIG, dealers said.
The greenback was also supported after the Fed decided to hold interest rates steady despite recent market turmoil, a move seen as a sign of confidence in a recovery.
The dollar firmed to 106.00 yen in Tokyo afternoon trade from 105.62 in New York late Tuesday.
But the dollar lost part of its earlier gains after the Bank of Japan unanimously decided to keep interest rates at a low 0.50 percent in line with earlier expectations.
"Tensions in global financial markets have increased and there are downside risks to the global economy," a Bank of Japan statement said.
Dealers said they were looking to a news conference later in the day by Bank of Japan Governor Masaaki Shirakawa, watching for clues on the future direction of interest rates.
The euro strengthened to 1.4173 dollars from 1.4127 and to 150.19 yen from 149.27 on a stronger-than-expected German business confidence survey, but the currency remains near one-year lows against the greenback.
The Fed announced an 85-billion-dollar rescue loan to save American International Group (AIG) from bankruptcy amid fears of a catastrophic effect on financial markets.
In an unprecedented intervention into private business, the US central bank agreed that the government will get an equity stake of 79.9 percent in the insurer.