LONDON: The dollar was broadly steady on Wednesday, with its index close to a six-week peak, as encouraging US economic data bolstered prospects that the Federal Reserve would trim its stimulus in September.
Analysts said some investors also sought the dollar's safety on uncertainty surrounding a possible US-led attack on Syria.
The US currency was supported by high Treasury yields. The two-year bond yield was at 0.4264 percent, not far from the 0.442 percent hit on June 26, its highest since July 2011.
The dollar index was down 0.1 percent at 82.297 but still close to Tuesday's peak of 82.516, which was its highest since July 22.
The dollar was supported by data on Tuesday which showed the US manufacturing sector grew last month at its fastest pace in more than two years.
The data firmed bets that the Fed will begin tapering its stimulus at its policy meeting on Sept. 17-18, unless US payroll numbers due on Friday fall short of forecasts.
"The Fed is likely to taper this month and that is going to keep the dollar underpinned," said Paul Bednarczyk, head of research at 4Cast. "Tapering is going to be the first step towards policy tightening before other major central banks so people will start buying dollars."
Positioning is also favouring the dollar according to Ulrich Leuchtmann, head of FX research at Commerzbank.
"People have had dollar short positions over recent weeks, which have become risky ahead of the US jobs report, so some want to get rid of these. This is also driving dollar strength."
The euro was up 0.1 percent at $1.3182, but close to Tuesday's trough of $1.3138, its lowest since late July.
Data released on Wednesday showed that euro zone businesses had their best month in over two years in August, suggesting the bloc's economy will grow slightly this quarter.
The euro, however, struggled near a one-and-a-half month low against the dollar, before a European Central Bank meeting on Thursday. The ECB is expected to reaffirm it will keep interest rates low to support the euro zone's fragile recovery.
This would be in contrast to the Fed's plans on moving away from its ultra-loose policy, so interest rate differentials will see the euro slip against the dollar.
"If the ECB uses strong language to enforce forward guidance, trying to keep interest rates low, this would be negative for the euro," said Commerzbank's Leuchtmann.
Caution ahead of this week's central bank meetings as well as the possibility of a US military strike on Syria were likely to keep major currency pairs in recent ranges.
President Barack Obama won the backing of key figures in the US Congress, including top Republicans, in his call for limited US strikes on Syria.
The dollar was flat against the yen at 99.55 yen, having tested a one-month high of 99.86 yen on Tuesday.
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