In short term, traders see 50% chance of Fed hike in July next year.
The rise in U.S. yields keeps pressure on the yen.
The dollar held near a one-year high against major peers on Wednesday, amid rising expectations the Federal Reserve will announce a budgetary tapering next month, potentially followed by interest rate hikes by mid - 2022.
On Tuesday, three Fed policymakers said that the U.S. economy has healed enough to begin to scale back the central bank's asset purchase programme, including Vice Chair Richard Clarida.
Money markets now price about a 50 - 50 chance of rate increase in July.
The index of the greenback measures the country against six rivals and decreased slightly from Tuesday to 94.356, when it touched 94.563 for the first time since September 20th, 2020.
A surge in prices has fuelled inflation worries and stoked bets that the Fed may need to move faster to normalise policy than officials had projected, sending two-year Treasury yields to their highest in over 18 months overnight.
Higher U.S. yields on Tuesday helped push the currency to a three-year high against the yen at 113.785 yen The pair traded last at 113.575.
The euro changed hands to $1.1551, well within sight of the previous session's $1.1522, its lowest in nearly 15 months.
Traders will focus on consumer price data later on Wednesday for further insight into the timing of higher rates.
The CPI is the main economic draw and has the potential to see Fed rate hike expectations move again, one way or another, said Ray Attrill, head of foreign exchange strategy at National Australia BankAustralia Bank in Sydney.
Most Fed policymakers continue to say inflationary pressures will prove transitory.
Governors Michelle Bowman and Lael Brainard are among the Fed officials due to speak later on Wednesday, when the minutes of the September meeting are also due to be released.
The release of FOMC minutes could confirm that a November taper announcement may be hard to resist for the Fed, but also that there were discussions of the potential impact of further tightening of U.S. and global financial conditions, said Valentin Marinov, the head of G 10 FX research at Credit Agricole.
We further believe that the Fed will ultimately opt for a relatively less mixed QE taper given the September unemployment report and the delay rather than resolution of the U.S. debt ceiling issue to compensate for this current problem. Sterling traded in the middle of this month's range, meandered a touch higher from Tuesday at $1.3624.
The risk-sensitive Australian dollar traded flat at $0.7347, the day before breaking from Tuesday's one-month high of $0.7384.
Bitcoin traded around $54,765, after reaching a five-month high of $57,855.