The pound dropped against its major counterparts in the European session on Tuesday, as U.S. treasury yields remain elevated following indications from the Federal Reserve that interest rates could remain high for an extended period.

The dollar held near 10-month highs against a basket of currencies and U.S. Treasury yields scaled a fresh 16-year peak as investors digested hawkish messages from key central bankers.

Chicago Fed President Austan Goolsbee said on Monday that high inflation remains the "biggest risk" to the economy and the Fed needs to have 100 percent commitment to get inflation back to the 2 percent target.

Separately, Minneapolis Federal Reserve Bank President Neel Kashkari said that rates probably have to go a little bit higher, and then be held higher for longer to cool things off.

Oil prices fell, weighed by a strong dollar and the prospect of higher interest rates that would hurt economic growth.

The pound weakened to more than a 6-month low of 1.2167 against the greenback and a 5-day low of 181.11 against the yen, off its early highs of 1.2215 and 181.81, respectively. The next possible support for the pound is seen around 1.19 against the greenback and 176.00 against the yen.

The pound dropped to 1.1111 against the franc and 0.8701 against the euro, from an early high of 1.1143 and a 4-day high of 0.8667, respectively. The pound is seen finding support around 1.10 against the franc and 0.89 against the euro.

Looking ahead, U.S. consumer confidence index for September, new home sales for August and FHFA's house price index and S&P/Case-Shiller home price index for July will be released in the New York session.

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