The U.S. dollar hovered below a three-month high to the euro on Thursday as attention turned to the European Central Bank's rate-setting meeting later in the day, after U.S. inflation data failed to alter views for a Federal Reserve pause next week.
The yen pulled away from near a 10-month trough to the dollar as a decline in long-term Treasury yields removed some support for the U.S. currency.
Australia's dollar popped to a one-week high after strong employment figures, but then quickly retraced most of the advance as the data showed the vast majority of new jobs were part-time.
The U.S. dollar index - measuring the currency against a basket of six developed-market peers, including the euro and yen - edged 0.1% lower to 104.63 in the Asian morning.
The euro added 0.1% to $1.07415, continuing its grind higher from last week's low of $1.0686.
The dollar slipped 0.2% to 147.125 yen , falling back from near last week's peak of 147.875.
The benchmark 10-year Treasury yield eased a further basis point (bp) to around 4.24% in early Thursday trading, extending a 1.6 bps decline from the previous session, when it also at one point surged to a three-week top at 4.352%.
Traders remain almost certain the Fed will keep rates steady again on Sept. 20, according to money market pricing. Odds for a quarter point increase by year-end though, stand at about 40%.
Meanwhile, wagers for a hike by the ECB later on Thursday now stand at about a two-in-three probability currently, from closer to a coin toss earlier in the week, bolstered partly by a Reuters report that Europe's central bank expects inflation will stay above 3% next year in its updated forecasts, far exceeding the 2% target.
The Fed's November meeting will be "a pivotal event," with a run-up in crude oil prices adding to the risk of another hike, potentially buoying the dollar, said James Kniveton, a senior corporate foreign-exchange dealer at Convera in Melbourne.
"It is premature to assert that USD bears have assumed control," he said.
At the same time, a hike by the ECB "could potentially catalyse a shift in momentum, relegating the dollar to a secondary position as the euro gains traction," he added.
Meanwhile, the Australian dollar rose as much as 0.5% to the highest since Sept. 5 at $0.64545 after figures showed the economy added a consensus-beating 64,900 jobs in August.
However, 62,100 of those jobs were part-time, and that detail saw a rapid paring of initial gains, with the currency last trading 0.1% higher at $0.64285.
(This story has been corrected to say that the dollar is near a three-month high versus the euro, not low, in headline and paragraph 1)
