The U.S. dollar rally was interrupted against most of the majors as strong Chinese data supported risk.

Fears engulfing the euro toned down a little amid speculation the European Central Bank could take action Thursday to contain the debt crisis, despite the news of Portugal's potential debt downgrade. But the euro continues to maintain Tuesday's trading range and will need to get above Tuesday's high ($1.3150) to garner further support.

Meanwhile, the risk-on sentiment, coupled with an astonishingly high manufacturing PMI, boosted sterling, which reached $1.565 and subsequently fell back.

The combinations of strong global PMI's and rise in risk appetite eased demand for safe-haven currencies, weakening the yen and Swiss franc, both of which are down vs. the dollar.

Elsewhere, despite the soft domestic data, with gross domestic product and PMIs both below consensus, the Australian dollar is buoyed by the strong Chinese data with the currency reaching $0.965 and then falling back after some profit-taking.

European sovereign bonds yields started to fall with Portugal and Ireland leading the decline on speculation the ECB will boost bond purchases to calm markets. Namely, 10-year Irish yields are down 15 basis points followed by a 11 basis points decrease in Portugal. In addition, Portugal's T-bills outperformed as the government raised all of the intended €500 million amidst solid demand as the issue was 2.5 times oversubscribed which helped support the drop in Spanish and Italian yields.

Meanwhile, 10-year German yields are up 8 basis points with the 10-year U.S. Treasury up 7 basis points, increasing the Germany's yield advantage and aiding euro strength.

The Bank of Thailand surprised the market by hiking its official repo rate by 50 basis points to 2%, while Indonesia is being vetted for a possible credit upgrade by Moody's.