By Bradley Davis Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--The dollar rebounded Wednesday from an overnight 15-year low against the yen as investors rode a wave of positive sentiment to send U.S. stocks higher and to shift into higher-yielding currencies. The euro posted gains against the dollar after a successful Portuguese government bond auction overshadowed--for now--fresh concerns about the credibility of European bank stress tests. The Canadian dollar, meanwhile, gained sharply against the greenback after the Bank of Canada raised interest rates, its third-consecutive increase of key rates. Wednesday morning, the euro was at $1.2756 from $1.2689 late Tuesday, according to EBS via CQG. The dollar was at Y83.93 from Y83.80, after falling as low as Y83.34 overnight. The euro was at Y107.08 from Y106.33. The U.K. pound was at $1.5485 from $1.5350. The dollar was at CHF1.0125 from CHF1.0098. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.453 from 82.815. Japan Finance Minister Yoshihiko Noda was the latest official to warn markets that Japan was ready to act to bolster the yen, specifically raising the specter of intervention for the first time. "We will take decisive steps--which of course include intervention--when it becomes necessary," Noda said. Analysts said the comments showed greater seriousness among Japan's authorities toward the possibility of direct intervention, something they haven't done since 2004. But there was still skepticism as to whether intervention would actually happen. "Not surprisingly, more rhetoric from Japanese policy makers has been unleashed, though the legitimacy of such talk is still in question until we see some actual action," said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto. The Bank of Canada, meanwhile, delivered a cautious tone as it announced its 25-basis-point rate increase, saying, "Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook." The rate increase puts the Bank's overnight target rate at 1.00%. In June, the Bank of Canada became the first central bank in the Group of Seven industrialized nations to raise interest rates since the global economic crisis took hold two years ago. The U.S. dollar was at C$1.0382 following the announcement, from C$1.0490 just before. It was at C$1.0475 late Tuesday. Separately, the euro gained against the dollar and rebounded from an all-time low against the Swiss franc, helped by the successful Portuguese debt auction. "The systemic risk playing against the euro has not subsided, but a sovereign default remains unlikely at the same time," said Lena Komileva, head of G7 market economics at Tullett Prebon in London. "The successful Portuguese bond auction shows that while European markets have tightened, they do remain open," she said. "They are not frozen." The euro had come under increased pressure Tuesday on a Wall Street Journal report that European bank stress tests underestimated the exposure of some major banks to sovereign debt. The article highlighted the lack of rigor in the tests, reviving fears over the health of European banks and raising doubts over the legitimacy of the euro's summer gains from the low of $1.1876 it hit in early June. -By Bradley Davis, Dow Jones Newswires; 212-416-2654; bradley.davis@dowjones.com

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