The U.S. dollar held near a three-month low on Thursday, after the U.S. Treasury moved to calm a sell-off in the bond market that had pushed long-term bond yields to their highest levels since 2007, boosting appetite for riskier assets and weakening the U.S. currency.

In trading, the dollar index, which measures the performance of the US currency against six major currencies, reached 98.723 points, its lowest level since May 14. The euro rose to $1.1692, approaching its highest level since mid-May.

Investors are struggling this week to counter a sharp sell-off in global bond markets, amid growing concerns about rising government debt and the potential for higher oil prices due to a lack of progress in ending the US-Israeli war on Iran.

The yield on the benchmark 30-year US Treasury note had surged to 5.337% earlier this week, its highest level in 19 years. In recent trading, the yield stood at 5.198%, having fallen 9 basis points following the Treasury Department's move, which effectively shifts a larger portion of government borrowing into shorter-term Treasury bills.

All eyes are on Yen

The broad weakness of the dollar provided some support for the Japanese yen, which moved away from the closely watched 160 yen-to-the-dollar level and traded at 158.41 yen-to-the-dollar, giving up some of its gains from the previous session.

The yen has been in the spotlight of the markets since the US and Japanese authorities intervened in a rare coordinated move at the end of July to halt its decline, after it had fallen to its lowest level in 40 years near 164 yen to the dollar.

The British pound rose to $1.3631, its highest level in three months, while the Swiss franc edged down slightly to 0.7986 francs per US dollar, after rising by about 2% in the previous session.

Minutes of the Federal Reserve meeting

Concerns about inflation deepened during the US Federal Reserve meeting last month, as several officials were prepared to raise interest rates, while many others felt that raising borrowing costs would be necessary if inflation did not fall back to the US central bank's 2% target, according to the meeting minutes.

Analysts believe that the minutes of the Federal Reserve meeting in July confirmed that the interest rate-setting committee was more inclined to tighten than at the June meeting, but with inflation, labor market and economic activity data coming out weak since then, there is no indication that an interest rate hike is imminent.