The U.S. dollar index eased from a 10-month high on Thursday but remained on track for a weekly gain, and investors stayed on guard for potential intervention in the yen as it holds near 11-month lows against the U.S. currency.
The dollar has jumped on expectations that the U.S. economy will remain more resilient to higher interest rates than other economies, after the Federal Reserve last week warned that it may hike rates further and is likely to hold them higher for longer.
"The dollar in this environment is benefiting from both higher yields but also more jittery risk sentiment," said Vassili Serebriakov, an FX strategist at UBS in New York.
"Global yields are rising, but with the U.S. economy outperforming the U.S. dollar still looks attractive."
U.S. benchmark 10-year yields hit 4.688% on Thursday, their highest since 2007.
The dollar index , which tracks the unit against six other majors, was down 0.40% on the day at 106.21, but is on track for an 11th straight week of gains, and just off its 10-month high of 106.84 hit on Wednesday.
The euro rebounded 0.50% on the day to $1.0554, but was still not far from its January low of $1.0482, which if broken would be the lowest since December.
"If that (January low) goes then we could go a bit closer to euro/dollar parity, but our base case scenario is that unless there's another negative shock for Europe then that won't be sustained," said Lee Hardman, senior currency analyst at MUFG.
Hardman said the euro was weakening partly because of the stronger dollar on the back of higher U.S. yields, and also because of "the cyclical divergence story: the U.S. economy has been more resilient while the European economy has been weaker."
Data on Thursday showed the U.S. economy maintained fairly strong growth in the second quarter at an unrevised 2.1% annualized rate.
A second report showed initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 204,000 for the week ended Sept. 23. Economists had forecast 215,000 claims for the latest week.
Contracts to buy U.S. existing homes also fell more than expected in August, tumbling by the most in nearly a year as high mortgage rates erode affordability.
Personal consumption data due on Friday is the next focus for further clues on U.S. inflation.
The Fed may be on the cusp of "something rare" by lowering inflation without a major blow to jobs and growth, and must be "extra careful" about relying too much on the history of past inflation fights in plotting further policy moves, Chicago Fed President Austan Goolsbee said on Thursday.
Fed Chairman Jerome Powell is due to speak later on Thursday.
The yen remains in focus as it trades near the 150 level, which is viewed as potentially spurring intervention from Japanese authorities.
Finance Minister Shunichi Suzuki said on Thursday that Japan would not rule out any options if there was any excessive volatility in currency moves, warning against speculative yen moves amid the currency's fall.
The dollar was last down 0.27% against the Japanese currency at 149.23 yen, easing from an 11-month high of 149.71 on Wednesday.