The dollar held steady near a three-month high against other major currencies in early trading on Thursday, supported by expectations of a slower pace of interest rate cuts from the Federal Reserve and growing bets on former US President Donald Trump winning a second term.
The dollar index, which measures the greenback against six major rivals including the euro and the yen, was at 104.30 by 0437 GMT, not far from the 104.57 level it hit overnight for the first time since July 30.
A series of strong macroeconomic indicators and some hawkish comments from Federal Reserve officials have reduced bets on the extent of monetary easing over the rest of this year, according to the CME Group's FedWatch tool.
Expectations for a combined 50 basis point rate cut during the remaining two meetings in 2024 have fallen to about 66 percent from about 70 percent the day before and about 86 percent a week ago.
Traders currently expect a 32 percent chance of a single 25 basis point rate cut by the end of the year, and only 2 percent expect no change.
As a result, the yield on the 10-year US Treasury note rose to a three-month high of 4.26 percent overnight.
The Japanese yen tends to weaken when U.S. bond yields rise, and the dollar rose against the Japanese currency to 153.19 yen on Wednesday for the first time since July 31.
The dollar has also benefited from a recent increase in market expectations that Republican candidate Trump will win next month's election, which is likely to lead to inflationary policies such as tariffs.
The euro fell to a near four-month low of $1.07612 overnight and was last trading at $1.079075, according to Reuters data.
The pound was steady at $1.29255, after falling to a more than five-week low of $1.29080 in the previous session.
