In Europe, the focus was on sterling and the UK manufacturing PMI survey for August, following a run of generally more upbeat-than-expected data.
The dollar's advance against the yen stalled on Thursday with investors positioning for Friday's non-farm jobs report, which is set to shape the market's near-term U.S. interest rate expectations.
In Europe, the focus was on sterling and the UK manufacturing PMI survey for August, following a run of generally more upbeat-than-expected data that has taken the edge off concerns about a sharp decline in economic activity following June's Brexit vote.
Sterling was trading 0.1 percent higher at $1.3150 ahead of the PMI report, due at 0830 GMT and expected to show a contraction, albeit less sharp than in July.
The dollar index, was flat at 96.050, pulling back from a three-week peak of 96.255. Against the yen, the dollar was down 0.1 percent at 103.29 yen, having hit a one-month high of 103.540 yen on Wednesday after a slightly stronger-than-expected ADP Report for August.
Its rise was tempered after the August Chicago purchasing managers' index (PMI) fell short of expectations.
"There are still some sceptics who are still not convinced that the Fed will take action (on rates) again this year," said Antje Praefcke, currency strategist at Commerzbank. "They have been misled by the Fed one too many times over the past few months in their hope for a rapid rate hike cycle following the lift-off."
Praefcke said those investors would have to rethink their positions and buy the dollar if the U.S. labour market report was stronger than forecast.
The dollar made significant gains following comments from Federal Reserve Chair Janet Yellen last Friday at a central bankers' gathering in Jackson Hole that revived near-term rate hike prospects.
"The dollar and Treasury yields had risen in tandem following Jackson Hole last week but that phase came to an end yesterday. The dollar will not be making much further headway before Friday's non-farm employment report," said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.
The Australian dollar rose after PMI data showed activity in China's manufacturing sector picked up unexpectedly in August, albeit modestly.
The Aussie, often used as a proxy for China-related trades, edged up 0.3 percent to $0.7540 after plumbing a one-month trough of $.07490 on Wednesday.