Rate hike bets hoist Euro and bolster US dollar

The rose 0.16% to $1.0003 in early Asia trade, which if sustained would make for a third session of gains in a row. Eurozone inflation data is due at 0900 GMT.

The U.S. dollar index, which measures the greenback against a basket of currencies, hovered at 108.71, just below a two-decade peak of 109.48 made on Monday, with the dollar having gained on sterling, the Aussie and the kiwi overnight.

The sliding yen steadied at 138.56 per dollar.

Chinese activity surveys due at 0130 GMT will be closely watched in the Asia session and could weigh on the yuan and the region's commodity currencies - such as the Australian dollar - if the data disappoints.

Another month of manufacturing contraction is expected for August, with a reading of 49.2 forecast, marginally higher than the 49.0 reading in July.

"I think that the recent data, particularly those industrial profits that came out over the weekend, are pointing to the risk that we might actually get a more severe downside surprise there," said Rodrigo Catril, a currency strategist at National Australia Bank in Sydney.

The Australian and New Zealand dollars were nursing losses, but both steadied in early trade to put the Aussie at $0.6861 and the kiwi at $0.6139.

The yuan was under pressure at 6.9211 per dollar in offshore trade.

U.S. job openings increased 199,000 to 11.239 million in July, data released overnight showed, pointing to persistently strong demand for labour and possibly foreshadowing a strong showing for broader labour data due on Friday.

New York Fed chief John Williams told the that it will "take some time" before interest rates would be cut, while Atlanta Fed President Raphael Bostic said: "I don't think we are done tightening."

Traders price about a 69% chance of a 75 bp Fed funds rate hike next month.

Sterling gained 0.1% to $1.1666 in early trade, after hitting a fresh 2-1/2-year low of $1.1622 overnight.