The dollar weakened to a two-month low on Tuesday after Federal Reserve officials signalled that the central bank was nearing the end of its tightening cycle, while the pound hit a 15-month high after pay growth exceeded expectations.

Several Fed officials said on Monday the central bank would likely need to raise interest rates further to bring down inflation but the end to its current monetary policy tightening cycle was getting close.

The comments knocked the greenback to a two-month low of 101.67 against a basket of currencies, as traders pared back their expectations about how much further U.S. rates may have to rise. The dollar index last traded 0.1% lower at 101.87.

U.S. interest rate expectations have been a key driver of the dollar since the Fed began its tightening cycle last year.

The yen was among the biggest gainers, strengthening around 0.6% and past 141 per dollar for the first time in nearly a month. It was last trading at 140.61.

The yen has risen more than 3% from a seven-month low touched last month, when it weakened past the closely watched 145 per dollar level that put traders on high alert for possible intervention from Japanese authorities.

Elsewhere, the euro was flat at $1.099, the Australian dollar steadied at $0.6680, while the New Zealand dollar fell 0.2% to $0.6198.

Source: CNBC