Investing.com - A rally in the dollar paused on Wednesday, as U.S. Treasury yields held below their recent seven-year highs, but demand for the greenback continued to be underpinned by expectations for a potentially faster pace of rate hikes from the Federal Reserve.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was holding steady at 95.4 by 04:13 AM ET (08:13 AM GMT), holding below a seven-week high of 95.84 reached in the previous session.
The dollar paused as the yield on 10-year Treasury notes eased after touching fresh seven-and-a-half year highs on Tuesday.
The sell-off in Treasuries has been spurred by expectations that the Fed will continue to raise rates in December and beyond as the outlook for the economy remains strong.
Rising bond yields have hit demand for stocks in recent sessions, souring risk appetite.
The dollar pushed higher against the yen, with USD/JPY rising 0.15% to 113.11.
The euro was little changed, with EUR/USD at 1.1490, holding above the previous session’s seven-week lows of 1.1431.
The single currency remained on the back foot amid an ongoing row between Italy’s populist government and the European Commission over the country’s budget plans.
Brussels and Rome have been at odds over the country's budget deficit plans for the next three years, which breach EC rules on running excessive deficits and high debt.
The row has seen Italian bond yields rise amid fears that the decision to increase borrowing will prove unsustainable given the country’s debt load.
Meanwhile, the pound was a touch higher, with GBP/USD rising 0.12% to 1.3159 following reports that the terms of the UK’s exit from the European Union could be settled as early as next week.