The currency rose by 0.16 of a cent to 100.84 cents US.
The catalyst to the optimism across the markets was a Chinese government pledge to maintain policies intended to strengthen the economy and an expression of willingness to "fine tune" them and make them more effective.
There were also reports that the government lifted investment limits for insurance companies and that the new Chinese leadership will remain focused on urbanization, which could ramp up infrastructure spending.
China has been a major prop for a global economy still trying to recover from the financial collapse and subsequent recessions of 2008. Signs of stimulus are welcome because the Chinese government had to take steps to weaken the economy over the last couple of years to deal with higher than acceptable inflation.
Oil prices lost early momentum as data showed a much higher than expected rise in U.S. gasoline inventories last week and the January crude contract on the New York Mercantile Exchange lost 62 cents to US$87.88 a barrel.
March copper added three cents to US$3.69 a pound. China is the world's biggest consumer of the metal, viewed as an economic bellwether because it is used in so many industries.
The February gold contract faded $2 to US$1,693.80 an ounce.
Traders also looked for possible progress in negotiations between the White House and Congress on a deal to avert the so-called "fiscal cliff" of automatic spending cuts and tax increases at the start of the new year. Without a deal, the U.S. could well fall back into recession and push much of the world down with it.
Bloomberg reported that some 40 Republicans have signed a letter calling for exploration of "all options" on taxes and entitlement programs, a signal that some rank-and-file members are ready to bargain.
House Republicans have so far proposed a 10-year, US$2.2 trillion blueprint that calls for increasing the eligibility age for Medicare and lowering cost-of-living hikes for Social Security benefits.
But the White House has dismissed the GOP plan since it fails to raise the top two tax brackets for upper-income earners — a core promise of President Barack Obama’s election campaign and a central demand in the current talks.
Traders also took in some mixed economic data.
In the U.S., payroll firm ADP reported that the private sector created 118,000 jobs during November. The U.S. government releases its non-farm payrolls report for November on Friday and economists expect the economy cranked out only about 95,000 jobs as job creation was impacted by Superstorm Sandy.
Elsewhere, retail sales across the 17 European Union countries that use the euro slumped far more than anticipated in October, largely due to a huge drop in Germany. Eurostat, the EU’s statistics office, says that eurozone retail sales fell 1.2 per cent in October from the previous month, double September’s decline and substantially more than the 0.2 per cent drop expected in the markets.