The dollar held near four-and-a-half-month highs against major currencies on Tuesday, as bets eased on the timing of the Federal Reserve's first interest rate cut this year.
The dollar touched a six-week high against the euro and came close to hitting the same level against the pound after US data on Monday showed an unexpected expansion in the manufacturing sector for the first time since September 2022.
However, expectations of intervention by Japanese authorities undermined the dollar's gains against the yen, despite long-term US Treasury yields rising to a two-week high last night.
According to the CME FedWatch tool, the U.S. interest rate futures market now expects a 61.3 percent chance of a rate cut in June, down from about 70.1 percent a week ago.
Richard Franulovich, head of currency strategy at Westpac, said the contrast in the dynamics of strong US growth and the reduced likelihood of a Fed rate cut versus slower growth in other major foreign currencies meant that any declines in the dollar index should be viewed as buying opportunities.
The dollar index, which measures the greenback's performance against a basket of six major currencies, rose 0.05 percent to 105.05, after earlier reaching 105.07, which matches its highest level recorded on Monday.
The euro fell 0.08 percent to $1.07335, after falling to $1.07295.
The pound lost 0.04 percent to $1.25455 after falling to $1.2541, just above a low of $1.2540 in the previous session.
The Japanese yen rose slightly to 151.75 per dollar, after earlier falling to 151.79.
This is the yen's weakest level since it hit a 34-year low of 151.975 on Wednesday, prompting Japan to step up warnings against intervention.
Finance Minister Shunichi Suzuki reiterated on Tuesday that he is not ruling out any options to respond to disorderly currency moves.
Japanese authorities intervened in 2022 when the yen fell to a 32-year low of 152 yen to the dollar.
The Chinese yuan fell to its lowest level in four and a half months, as the dollar's rise offset selling of the US currency by state-owned banks.
The yuan fell to 7.2349 per dollar during the day, its weakest level since November 2023.
The Australian dollar was steady at $0.6490, after falling to a near one-month low of $0.64815 on Monday.
The New Zealand dollar fell 0.1 percent to $0.5947, retreating towards a four-and-a-half-month low of $0.59395 hit overnight.
In cryptocurrencies, Bitcoin fell 4.4 percent to $69,707, after a sudden drop of more than $3,000 in about 15 minutes.
