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The US dollar maintained its gains near a two-month high during Thursday's trading, buoyed by mounting inflation fears and rising market bets that the US Federal Reserve will continue to hike interest rates.

The greenback's ascent followed the release of robust US business activity data, alongside a spike in Treasury yields triggered by a weak five-year note auction.

The euro slipped to $1.1378, its lowest level in two months, while the British pound steadied near a three-month low of $1.3231.

Meanwhile, the US dollar index (DXY), which measures the greenback against a basket of major peers, held steady near 101.10—its highest level in two months.

Bond Yields Bolster the Greenback:
Purchasing Managers' Index (PMI) data revealed that US business activity accelerated in September to its highest level in over five years, reigniting concerns over persistent inflationary pressures.

Furthermore, weak demand for US five-year Treasury notes in the latest auction sparked a fresh wave of bond sell-offs. This pushed the five-year yield above the 5% threshold for the first time since 2007.

The surge in bond yields enhances the appeal of dollar-denominated assets, just as markets actively recalibrate their expectations for the US interest rate trajectory.