The U.S. dollar witnessed its best weekly gain in three months on February 4. The American currency was lifter by rising confidence that the U.S. economy rebound will outpace global peers.
The dollar index was close to the two-month high hit overnight amid signs of resilience in the labour market, with closely observed nonfarm payroll figures due Friday.
According to JPMorgan’s head of Japan market research in Tokyo, Tohru Sasaki, U.S. economy is exceptionally strong relative to other countries, prompting dollar short covering.
In the Asia session, the U.S. dollar index was slightly changed at 91.529. It was rising every day during this week and hit 91.581 on Thursday for the first time since December 1.
The gauge boosted by 1.1% during the week, the most since November 1. Significantly, in the previous week, it witnessed a 0.3% gain.
Furthermore, the U.S. dollar got support from a boost in longer-term U.S. Treasury yields, as traders positioned for a massive fiscal spending package.
American currency stood at 105.585 against the yen
Analysts and investors are trying to evaluate whether greenback strength in 2021 in a temporary position adjustment after a 7% slump for the dollar index in 2020 or a longer-lasting shift away from greenback pessimism.
Besides, there are potentially a lot of dollar shorts to cover, particularly versus the yen, where hedge funds had boosted their biggest bearish bets since 2016.
Additionally, the American currency was slightly changed against the yen and stood at 105.585 yen on Friday. In the earlier session, the dollar hit 105.70, a level unseen since October 20.
Moreover, the euro was mostly flat at $1.1966, keeping its first move below $1.20 since December 1 from overnight.
According to Westpac strategists, Europe’s vaccine rollout will expand by the end of this quarter. Furthermore, the Fed’s commitment to ultra-loose monetary policy will put pressure back on the greenback.