The yen fell against all its major counterparts after China cut its key interest rates for the first time since 2008, damping appetite for refuge assets. China’s benchmark one-year deposit rate will drop by 0.25 percentage point effective tomorrow, the People’s Bank of China said on its website. The one-year lending rate will also be cut by 0.25 percentage point, it said.

The Dollar Index pared losses as Federal Reserve Chairman Ben S. Bernanke refrained from signaling additional steps the central bank might take to spur growth, during congressional testimony. Bernanke said the economy is at risk from Europe’s debt crisis and the prospect of fiscal tightening in the U.S., while not signaling additional monetary easing.

The euro earlier touched to a two-week high versus the dollar earlier as German Chancellor Angela Merkel said the nation is ready to back euro-area financial instruments.

The pound strengthened to a one-week high against the dollar and gilts fell after the Bank of England kept its stimulus program unchanged and China cut borrowing costs to boost growth. Sterling rose versus all except one of its 16 major counterparts after a report showed U.K. services grew more in May than analysts forecast. Policy makers held the bond-purchase program at 325 billion pounds ($505 billion) and their benchmark rate at a record-low 0.5 percent.