By Peter Nurse

-- The U.S. dollar weakened in early European trade Tuesday as more Federal Reserve officials indicated a slowdown in interest rate rises, with traders speculating a peak in rates might be close.

At 03:10 ET (08:10 GMT), the , which tracks the greenback against a basket of six other currencies, dropped 0.4% to 106.067, falling to a new three-month low.

Fed Vice Chair was, on Monday, the latest Fed official to comment on the state of the central bank’s battle against , echoing weekend comments by Fed Governor Christopher Waller that interest rates need to keep rising to battle inflation, although likely at a slower pace.

"I think it will probably be appropriate soon to move to a slower pace of increases, but I think what’s really important to emphasize is ... we have additional work to do," Brainard said in an interview with Bloomberg in Washington.

Expectations are growing that the will increase interest rates by just 50 basis points in December, a smaller hike than the 75 basis points at the last four meetings.

This change in stance means the U.S. dollar has peaked and is set to decline in 2023, according to Morgan Stanley, expecting the Fed to make its final rate hike in January 2023, with a rate cut to follow in the fourth quarter.

The bank sees the dollar index sliding to 104 by the end of next year, while the euro will outperform. The index fell 4% last week, its worst week in more than two and a half years.

Later in the session, the headline U.S. producer price index for October is expected to rise 8.3% on an , a slower pace than September, and up 0.4% .

Elsewhere, rose 0.5% to 1.1810, climbing close to Friday's 2-1/2-month top of 1.1855, after U.K. pointed to a tight labor market.

The number of people claiming in the U.K. rose by just 3,300 in October, less than feared, while growth excluding bonuses accelerated in the year through September to 5.7%, climbing at the fastest pace in more than 20 years.

Even though earnings are still running well below an rate of around 10%, the figures indicate little slack in the economy that would allow the to stop its sequence of interest rate rises.

rose 0.8% to 1.0410, climbing to a new three-month high, while the risk-sensitive rose 0.8% to 0.6750.

fell 0.3% to 139.50, with the yen benefiting from the wider weak dollar tone even as data showed the world's third largest at an annualized rate of 1.2% in the third quarter.

fell 0.5% to 7.0355, with the yuan helped by the holding interest rates unchanged for a third straight month, outweighing data showing weaker-than-expected and in October.