The Dollar reached a 10-month high on Wednesday, driving the Pound and Euro to six-month lows.

At the time of writing, the single currency was down 0.3% at $1.0534, a low not seen since 15th March. The Euro is on course to lose over 3% in the three months to the end of September, the worst quarterly performance in a year.

Whereas Sterling declined 0.2% to $1.2134, its lowest since 17th March and was on course for a quarterly loss of more than 4%, Reuters news agency reports.

The Pound is set for the largest monthly decline since August last year as money markets price in no more rate hikes from the Bank of England this year, as per LSEG data. Traders predict the central bank will begin cutting rates in the summer of 2024.

The Sterling rose 0.1% against the Euro to 86.87 pence after hitting a low of 87.05 pence against the single currency on Tuesday.

In addition, the Dollar index – measuring the currency against six major rivals – hit a 10-month top of 106.49.

"It's clear now that markets see higher long-term yields in the US for a longer period. That's the main driver for the Dollar here," according to Dane Cekov, senior FX strategist at Nordea.

"It's been a while since we've seen 10-year yields at 4.5%."

Over the past few days, officials at the Federal Reserve have highlighted the possibility of further interest rate hikes after it held rates steady at last week's meeting but reinforced its hawkish monetary policy stance.

This sent US Treasury yields to multi-year highs. At the time of writing, the benchmark 10-year yield stood at 4.507% after reaching a 16-year high on Tuesday of 4.566%. Whereas the two-year yield stood at 5.06%, the Reuters report adds.