The British pound and Japanese yen faced strong selling pressures, and the tense situation in the Middle East jointly supported the US dollar. Now, all focus turns to Friday's US non-farm employment report.

As traders begin to question how aggressive the Federal Reserve's interest rate cut path will be compared to global peers, the dollar has risen this week.

The Bloomberg Dollar Spot Index rose for the fourth consecutive trading day on Thursday, setting a record for the longest winning streak in a month. Traders are now focusing on the US monthly employment report to be released on Friday, which is expected to show that the labor market is cooling down at a slower pace than initially thought.

Kathleen Brooks, head of research at foreign exchange broker XTB, said, "The risk of a strong employment report in September has increased, which could lead to greater fluctuations in the US stock market and the dollar than usual. High risk aversion combined with the US employment report is an unstable mix."

Uncertainty surrounding the Federal Reserve's interest rate cut path and the US election has led traders to be cautious in their stance on the dollar. This has made its recent rebound more related to rival currencies.

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The selling of major currencies such as the British pound and Japanese yen has supported the dollar's strength during the trading session. The British pound fell more than 1% against the dollar on Thursday, after Bank of England Governor Bailey hinted that more aggressive monetary easing could be adopted if inflation remains low. On Wednesday, Japanese Prime Minister Kishida Fumio shocked the market by stating that the Japanese economy is not yet ready for another interest rate hike, causing the yen to extend its losses.

"We have been pointing out that the dollar looks cheap and oversold. As market attention shifts from the US to other parts of the world, the dollar is bound to rebound and rise," said Jayati Bharadwaj, a currency strategist at TD Securities. "As US economic data stabilizes and economic data from other parts of the world slows down, this prompts us to re-evaluate the interest rate cut trajectories of central banks in these economies."

In addition, the sharp escalation of conflicts in the Middle East has also supported the dollar. After Israel attacked Lebanon, Iran fired about 200 ballistic missiles at Israel on Tuesday, and Israeli Prime Minister Netanyahu vowed to retaliate. The dollar usually rises during periods of geopolitical pressure because investors seek refuge in US assets.

Helen Given, a foreign exchange dealer at Monex Inc., said, "Safe-haven buying, as well as the fact that the US economy is not in trouble, is boosting the dollar."