By Samuel Indyk and Rae Wee

LONDON (Reuters) -The dollar rose on Thursday, while longer-dated U.S. bond yields hovered near multi-month highs as investors bet that President-elect Donald Trump's policies would fuel inflation and keep interest rates higher for longer

European shares bounced from three-month lows after a number of positive earnings updates, while bitcoin jumped back above $91,000, having surpassed that level in the previous session, turbocharged by Trump's return to the White House.

Bitcoin, the world's largest cryptocurrency, last traded over 3% higher at $91,604, having already soared more than 30% in the last two weeks.

In the broader market, traders responded to a U.S. inflation print that was in line with expectations by adding to bets on a Federal Reserve rate cut next month, though the monetary policy outlook for 2025 and beyond was clouded by Trump's return to office.

Trump's plan for lower taxes and higher tariffs is expected to spur inflation and reduce the Fed's scope to ease interest rates, buoying the dollar.

Edison Research also projected on Wednesday that the Republican Party will control both houses of Congress when the President-elect takes office in January, which would enable Trump to pursue his agenda largely unhindered.

Uncertainty over potentially larger U.S. deficits and stickier inflation was reflected in longer-dated U.S. bond yields, which traded near multi-month highs on Thursday. [US/]

The benchmark 10-year Treasury yield peaked at 4.483% on Thursday, according to LSEG data, its highest since July 1.

The 30-year yield hovered near a five-month peak and last stood at 4.6249%.

"Even though we're not optimistic Trump's policies will be a big boost to growth, they will increase indebtedness and boost inflation and that could change the Fed's plans," said Nordea chief analyst Jan von Gerich said.

On the shorter end of the curve, the two-year yield, which typically reflects near-term rate expectations, touched 4.324% but was last little changed on the day at 4.2753%

Markets are now pricing in an 83% chance of a 25 bps rate cut from the Fed next month, up from about 59% a day ago, according to the CME FedWatch tool.

However, expectations of Fed cuts next year have been pared back following Trump's election victory.

The dollar, meanwhile, pushed higher, ignoring the rising bets of a Fed cut in December which would typically be negative for the currency.

The dollar's rise pushed the euro to a one-year low of $1.0496, its first time below $1.05 in over a year, and broke above the 156 yen level.