Dollar enjoys improving outlook

TOKYO (Reuters) – FX Signals | The dollar traded near multi-month highs against most major currencies on Friday, supported by a wave of optimism over improving U.S. economic data, the rollout of coronavirus vaccines, and rising Treasury yields.

The euro rebounded slightly ahead of data on German business sentiment due later in the day, but the outlook for the common European currency has soured because of renewed coronavirus lockdowns and the slow pace of vaccinations across the European Union.

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The greenback has more room to rise against the euro, but its gains against other currencies in the past few weeks have been so rapid that some analysts are warning against chasing the dollar higher from current levels.

“The euro has broken through the 200-day moving average, and that is a clear sign that it will continue to go lower,” said Minori Uchida, head of global markets research at MUFG Bank in Tokyo.

“The yen is getting strong on some of the crosses, which will cap dollar/yen. Yields have supported the dollar, but this move could start to run out of steam.”

Against the euro, the dollar fell to $1.1778 but was still near its strongest level since November last year.

The dollar rose to 109.25 yen, which is near its highest since June.

The greenback traded at 0.9399 Swiss franc, holding onto a 0.5% gain from the previous session.

The dollar index against a basket of six major currencies stood at 92.769, close to a four-month high. For the week, the dollar index was on course for a 0.9% gain.

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Traders will look to data on U.S. personal consumption due later on Friday for further hints about the strength of the U.S. economy.

FX Signal; Dollar Edges Lower in Consolidation

During European trading, Germany’s Ifo survey is expected to show an improvement in business morale. But this is unlikely to halt the euro’s slide, because worries about the European Union’s slow vaccination rollout and bickering with former member Britain over vaccine exports have become a dominant theme, traders said.

The Australian and New Zealand dollars rebounded from sharp losses earlier in the week.

The two currencies are likely to remain supported because of their relative success in limiting the economic fallout caused by the coronavirus pandemic, analysts said.

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