NEW YORK: The dollar strengthened on Wednesday, lifted by rising Treasury yields, though the pound gained against the greenback after British inflation stayed above 10% in March adding to pressure on the Bank of England to keep raising rates.

The dollar index, which tracks the currency against a basket of its peers, was up 0.108% as markets turn more skeptical that the Federal Reserve will cut rates later this year.

The yield on two-year Treasury notes, which are sensitive to expectations for the US central bank’s monetary policy, was up 3.8 basis points to 4.237% after earlier hitting a one-month high.

The dollar has been on the defensive for some time with the debt ceiling in Congress unresolved and the migration of deposits in the US banking system still a concern, Rai said.

Sterling was last trading at $1.2452, up 0.23% on the day, while the dollar against the rate-sensitive yen rose 0.24% at 134.41, after briefly poking above 135 for the first time in a month.

Wednesday data showed British consumer price inflation eased by less than expected in March to 10.1% from February’s 10.4%, meaning Britain has western Europe’s highest rate of consumer inflation.

Deutsche Bank on Wednesday revised up expectations for British rates to include two more 25 basis point rate hikes from the Bank of England. Morgan Stanley now predict one, with a risk of a second.

The pound also strengthened a little against the euro, with the common currency down 0.2% to 88.12 pence.