The euro continued to retreat from near a three-month high to Japan's currency after European Central Bank President Christine Lagarde earlier this week tapped down expectations of aggressive interest rate hikes.

The dollar touched a one-month high versus the yen on Wednesday, boosted by a climb in Treasury yields to multi-year peaks overnight as traders wait on U.S. inflation data this week for clues on the pace of Federal Reserve policy tightening. The euro continued to retreat from near a three-month high to Japan's currency after European Central Bank President Christine Lagarde earlier this week tapped down expectations of aggressive interest rate

A more hawkish tone from both the ECB and the Fed last week caught markets off guard and sent yields soaring on euro zone and U.S. debt in anticipation rates could rise faster and higher than previously expected.

The dollar rose at one point in early Asian trading to 115.69 yen, the highest since Jan. 10, before pulling back to last trade 0.08% lower at 115.43. The 10-year Treasury yield surged as high as 1.97% on Tuesday for the first time since

The yield on the two-year note, which is more sensitive to interest rate expectations, reached 1.347 for the first time since Markets are pricing in more than a 70% chance of a 25 basis point hike and a nearly 30% chance for a 50 basis point hike when U.S. policymakers meet in March, according to CME's FedWatch Tool. High U.S. inflation may go even higher before getting better, San Francisco Fed President Mary Daly said on Tuesday.