The dollar hovered close to its four-month high against its major rivals on Wednesday, buoyed by firm economic outlook in the United States and rising yields amid signs of a slowdown elsewhere, especially in Europe.
Dollar index Futures ticked down 0.1 percent in Asia after having gained 1 percent in the preceding two days. It stayed above 92 after hitting its highest since early January.
The index climbed above its 200-day moving average for the first time in a year, triggering a wave of short-covering.
As the Federal Reserve is widely expected to keep the benchmark interest rate on hold the next FOMC meeting ending on Wednesday, it looks certain to raise borrowing costs next month, given signs of possible acceleration in the U.S. economy.
Investors believe U.S. President Donald Trump's tax cuts and spending plans are acting as additional stimulus at a time of already solid economic expansion. These could further fuel inflation and prompt a faster pace of rate rises.
In contrast, expectations of rising rates are diminishing in Europe as recent economic figures suggest dampening momentum after impressive growth last year.
GBP/USD traded higher to 1.3631 after having slipped to a four-month low of 1.3580 on Wednesday on soft UK manufacturing data the previous day. Swap markets are now showing around a 15 percent chance of a rate increase this month, down from 90 percent in early April.
EUR/USD nudged higher to 1.2030, still near Tuesday's low of 1.1981, which was its lowest since mid-January. The common currency also eased to 131.58 versus the yen, its lowest in three weeks, and now EUR/JPY trades above 132.
