The U.S. dollar strengthened slightly on Thursday in relatively thin trading due to the Thanksgiving holiday, although the currency remained on pace for its biggest weekly decline in four months.

By 04:49 ET (09:49 GMT), the U.S. dollar index, which tracks the greenback against a basket of rival currencies, had inched up by 0.1% to 99.69.

Analysts have pointed to news reports suggesting White House economic adviser Kevin Hassett is the frontrunner to become the next Chair of the Federal Reserve, saying Hassett’s bias toward aggressive interest rate reductions could weigh on the dollar.

Hassett is a close ally of U.S. President Donald Trump, who has long badgered the central bank and its current Chair Jerome Powell to quickly and deeply reduce borrowing costs to help support the economy.

Despite signs of internal debate between Fed policymakers, the central bank is now widely expected to bring down rates by 25 basis points at its final meeting of the year in December. Officials previously rolled out equally-sized cuts at their October and September gatherings, signaling a decision to prioritize a weakening labor market over sticky inflation.

According to CME’s FedWatch Tool, there is a roughly 85% chance the Fed will unveil a quarter-point drawdown at the end of its December 9-10 meeting, up from about 39% a week ago.

"The dollar remains somewhat expensive against G10 currencies, but given the size of this week’s correction and limited room for further dovish repricing before some more data comes in, we are switching to a neutral bias on [the dollar] for this Thanksgiving holiday," analysts at ING including Francesco Pesole said in a note.

Elsewhere, the euro dipped against the dollar by 0.2% to $1.1580. Investors have been keeping tabs on progress in peace talks between Ukraine and Russia, which could bolster the single currency.

While a top U.S. envoy is due to travel to Russia next week, reports have said Moscow will not be willing to make big concessions in a peace deal with Kyiv.

In Japan, the yen USD/JPY inched higher by 0.1% against the dollar. Traders were monitoring the increased probability of a Bank of Japan rate hike as soon as next month. The move could also come in light of the yen hitting a 10-month low last week.

(Ayushman Ojha contributed reporting.)