The dollar rose to a one-month peak on Tuesday versus its major rivals on the view the Federal Reserve may hike interest rates one more time this year. Sterling meanwhile, tumbled after the Bank of England's Governor extinguished any speculation it was close to raising rates.
The greenback crept higher after comments from New York Fed President William Dudley on Monday who said further gains in the job labor market would shore up inflation, which has shown signs of struggle in recent months.
The U.S. central bank as expected raised key overnight borrowing costs by a quarter point to 1.00-1.25 percent last Wednesday.
Several key figures from the Republicans camp, spoke of completing U.S. tax reform in 2017, lifted the buck as this is widely seen as a likely boost economic growth.
USD/JPY slipped more than 0.2 percent to 111.39, its lowest since May 26. That halted a gain of almost 3 percent from the dollar's near 2-month low of 108.81 yen set on June 14.
EUR/USD fell more than a quarter percent to a three-week low of 1.1118.
The British pound was the weakest among major currencies. It plunged after BoE Governor Mark Carney said now was not the time to raise UK interest rates.
Last week three BoE policymakers had voted in favor of a rate hike. Carney warned of weak wage growth and a likely hit to incomes as Britain prepares to leave the European Union, sending GBP/USD two-month low of 1.2601, down more than a percentage point.
