The dollar plunged on Thursday, but lingered not far from the three-month peak, driven by predictions that Federal Reserve will adopt a more measured approach to interest rate cuts before the presidential election in the US.

The dollar index that gauges the greenback versus its major pairs, dipped 0.2% lower to 104.095, close to level witnessed earlier in July.

The dollar has seen strong demand as recent economic data indicates that the US economy is performing relatively well, implying that the Fed may not need to be as aggressive in its easing measures as previously anticipated.

The Federal Reserve's Beige Book, published on Wednesday, indicated that economic activity has remained mostly stable since early September, with the labor market continuing to demonstrate signs of strength.

The steady economic outlook coincides with a series of recently released robust economic indicators, such as the strong jobs report for September and increased retail sales.

Markets are expecting close to 50 basis points in rate cuts for the rest of the year, suggesting a likely 25 basis point decrease in November.

EUR/USD ticked up by 0.2% higher to 1.0797, as traders are grasping the recent economic activity figures and PMI from the eurozone area.

GBP/USD advanced by 0.3% to 1.2961, recovering as the pair slumped to the lowest level in five weeks in the earlier session, before the release of PMI figures from UK.

USD/JPY slid by 0.4% to 152.19, dipping a bit after reaching a nearly three-month high in the previous session.