The U.S. dollar retreated on Wednesday, with the dollar index falling 0.2% to 101.22, but remained positioned for its strongest monthly advance since June. Federal Reserve Bank of New York President John Williams said there was "no need for urgency" on further rate increases, reducing market-implied odds of an October hike from above 70% to about 50% and later below 50%. Attention now turns to Friday's employment report and the PCE price gauge (the Federal Reserve's preferred inflation measure). Two-year government bond yields fell about 3.5 basis points. The yen rose 0.3% to 156.77 per dollar after renewed Japanese warnings over currency weakness, while the Australian dollar fell 0.3% to $0.6900 after softer inflation data, a day after the Reserve Bank of Australia raised its benchmark rate by 25 basis points to 4.60%. The euro edged up to $1.1354 but remained on track for its steepest monthly decline against the dollar in 14 months, pressured by energy-market volatility and French political uncertainty. The yuan held near 6.71 per dollar as China's manufacturing sector returned to expansion in September, while sterling and the New Zealand dollar remained near multimonth lows.