The dollar hovered below a 16-month peak in early Asian trade on Thursday, having lost ground on the pound and yen overnight as the U.S. currency took a breather while traders considered whether its recent surge was starting to run out of steam.

Sterling was at $1.3491, a one week high against the dollar having jumped 0.5% on Wednesday after a jump in Britain’s October inflation piled pressure on the Bank of England to hike rates at its meeting next month.

Against the Japanese currency, at 114.18 yen the dollar was still in sight of Wednesday’s 4-1/2-year high of 114.97, and the euro was at $1.1316, languishing near a 16-month low with markets seeing the eurozone near the back of the central bank rate-hike queue.

Strong U.S. retail sales data earlier this week added fuel to the dollar’s recent rally, which started last week after a strong U.S. inflation print bolstered market bets that the Federal Reserve will have to raise rates around the middle of next year.

The dollar index, which measures the currency against a basket of six rivals, has climbed from 93.872 on Nov 9, the day before the inflation data to 96.226 on Wednesday, its highest since mid July 2020. It was last at 95.798.

However, “the sustainability of the current dollar strength beyond the next few months looks far from certain,” said Luc Luyet, FX Strategist, Pictet Wealth Management.

“Market expectations of the Fed are starting to be particularly hawkish, suggesting limited tailwinds for the U.S. dollar going forward from that factor.”

“Furthermore, the economic growth outlook may turn more supportive of the euro as the worst of the slowdown of China’s economic activity looks mostly behind us, whereas Covid and energy import costs may prove less of an issue past winter.”

Others, however, saw a drop in the dollar as a chance to buy.

“Dips have been hard to come by lately, but anything into the low-95s looks like a buying opportunity,” said analysts at Westpac in a note.

Elsewhere, commodity currencies were hurt by oil prices, which slumped to six week lows.

The Canadian dollar was at 1.2608 per U.S. dollar, near its six week low hit a day earlier. Markets are expecting the Bank of Canada to start raising interest rates early next year.

The Australian dollar was at $0.7263, also at a six week low.

Bitcoin was little changed around $60,500.