By Kevin Buckland TOKYO (Reuters) – The dollar headed for its best weekly gain in three months, fueled by growing confidence that the US economic recovery will outpace its global peers. It was just shy of a two-month high reached overnight amid signs of resistance in the labor market, with nonfarm payroll figures to be closely watched on Friday. “The US economy is exceptionally strong relative to other countries, causing dollar shorts to hedge,” said Tohru Sasaki, head of Japan market research at JP Morgan in Tokyo, pointing to employment and manufacturing indicators. , as well as the rate of vaccinations. The current outbreak of dollar strength could continue for “several weeks,” he said, but the outlook is darker thereafter as Europe and Asia catch up on immunizations and the Federal Reserve’s continued ultra-light monetary policy. limits an increase in long-term US returns. . The dollar index changed little to 91.529 early in the Asian session after rising every day so far this week and hitting 91.581 on Thursday for the first time since Dec. 1. since November 1, based on a 0.3% increase the previous week. The dollar was supported by a spike in long-term US Treasury yields, which came as traders positioned themselves for a massive fiscal spending package. Democrats in the United States Senate were poised for a marathon “vote by branch” session aimed at overcoming Republican opposition to President Joe Biden‘s $ 1.9 trillion COVID-19 relief proposal. Analysts and investors are weighing whether the strength of the dollar this year is a temporary position adjustment after a 7% drop for the dollar index in 2020, or a more enduring reversal of dollar pessimism. There are potentially a lot of short dollar positions to hedge, particularly against the yen, where hedge funds had accumulated their biggest bearish bets since 2016. The dollar changed little to 105.585 yen on Friday after rising to 105.70 for the first time. . from October 20. The euro was mostly flat at $ 1.1966, maintaining its first move below $ 1.20 since December 1 from overnight. Westpac strategists see the launch of the vaccine in Europe accelerating later this quarter, which, coupled with the Fed’s commitment to ultra-flexible monetary policy, will put pressure on the dollar again. “DXY’s upside potential is living on borrowed time,” they wrote in a note, referring to the dollar index. “Sell DXY at 92.”
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