TOKYO: The U.S. dollar ticked down to a three-month low against peer currencies on Tuesday after slipping overnight on weaker-than-expected new home sales data, while traders hunkered down on bets that the Federal Reserve could start cutting interest rates in the first half of next year.

U.S. new home sales fell 5.6% to a seasonally adjusted annual rate of 679,000 units in October, data showed, below the 723,000 units expected by economists polled by Reuters and sending Treasury yields into a decline.

The dollar index, a measure of the greenback against a basket of currencies, was last at 103.11, its lowest since Aug. 31. The dollar was track for a loss of more than 3% in November, its worst performance in a year.

Market expectation that the Fed's rate increase cycle has finally come to an end has also put downward pressure on the greenback. U.S. rate futures showed about a 25% chance that the Fed could begin cutting rates as early as March and increasing to nearly 45% by May, according to the CME FedWatch tool.

"Slowing growth momentum, peak rates, rate cuts next year, and unwinding of long positioning: it's the dynamic feeding a weaker U.S. dollar and driving the entire currency complex," said Kyle Rodda, senior financial market analyst at Capital.com.

"Anything that brings that trend into question will change the outlook; however, the bar for that to happen is high," he added, saying the dollar likely has more room to fall.

Traders are now eyeing U.S. core personal consumption expenditures (PCE) price index - the Fed's preferred measure of inflation - this week for more confirmation that inflation in the world's largest economy is slowing.

PCE tops off a slew of other key economic events this week, including Chinese purchasing managers' index (PMI) data and OPEC+ decision.

After delaying its policy meeting to this Thursday, OPEC+ is looking at deepening oil production cuts, according to an OPEC+ source.

The Australian dollar briefly touched a fresh three-and-a-half month high of $0.66155 before falling to $0.66105. Data out Tuesday morning showed that domestic retail sales in October declined from the previous month.

The kiwi also momentarily hit its highest since Aug. 10 at $0.61055 before sliding back down to $0.61005. The Reserve Bank of New Zealand has its monetary policy meeting on Wednesday, where it is expected to keep interest rates steady at 5.50% for the fourth straight time.

Elsewhere, the yen held around 148.10 as the dollar's recent weakening continued to offer the Japanese currency some breathing room.

Although the Fed's job may be finished, expectations are ramping up for the Bank of Japan to at last begin exiting from its ultra-loose monetary policy; more than half of the economists polled by Reuters expect the Japanese central bank to make its move at its April meeting.

The dollar "still holds a significant yield advantage over the (yen)," Tony Sycamore, a market analyst at IG, wrote in a note. "We suspect an aggressive unwind is unlikely unless (dollar/yen) were to break trend channel support 146.50/30 area."

(Reporting by Brigid Riley. Editing by Gerry Doyle)