The dollar climbed back towards its highest level in 2018 on Monday as investors continued to bet that rising interest rates in the United States would boost the greenback. The index measuring the dollar against a basket of currencies rose 0.2 percent to 92.749, not far from the 92.9 level - a 2018 high - it hit on Friday.
The dollar has rallied heavily over the past two weeks after investors rushed to unwind short positions and bet that higher rates in the US and signs its economy is performing better than other regions would feed through to a stronger currency.
Commerzbank analyst Esther Reichelt said the dollar move was the "bursting of a dollar negative bubble" and that it had further to go.
"The interest rate differentials are clearly pointing towards a stronger dollar," she said, citing expectations the European Central Bank and the Bank of England now look less likely to raise rates as soon as had been expected.
Weaker US jobs and wages data on Friday did little to temper perceptions of strength in the US economy and failed to hold back the dollar's rise, although renewed concerns about trade frictions with China could cloud its outlook.
The US economy added fewer jobs than expected and the average hourly earnings, closely watched for signs of inflationary pressures, rose a less-than-expected 0.1 percent in April, leaving the annual increase at 2.6 percent.
None of this changed the perception that the Federal Reserve will likely hike interest rates at least twice, and possibly three times, by year-end.
In contrast, recent data have suggested the stellar growth seen in Europe last year is losing momentum, leading speculators to trim bets on the single currency on expectations the European Central Bank will wind down its stimulus.
The euro changed hands 0.3 percent lower at $1.1927, not far from Friday's four-month low of $1.1910. Data from US financial watchdog published late on Friday showed speculators' net long positions in the euro in Chicago's futures exchange declined only slightly in the latest week.
They held 120,568 contracts of net short positions, down from a record 151,476 set last month but still at a high level.
A wider measure of dollar positioning that includes contracts on some emerging market currencies showed net dollar shorts shrank to $18.32 billion, from a seven-year high of $28.18 billion two weeks earlier.
"Speculators' positioning has gone to extreme levels as they had been selling the dollar continuously," Yukio Ishizuki, senior strategist at Daiwa Securities.
Traders were also keeping an eye on the fate of the 2015 Iran nuclear deal, from which US President Donald Trump has threatened to pull out.
An escalating diplomatic stand-off could have innumerable repercussions, including a further rise in oil prices and damage to investors' risk appetite. Trump has said that unless European allies rectify "flaws" in Tehran's deal with world powers by May 12 he will refuse to extend US sanctions relief for Iran.
Elsewhere, the British pound traded up 0.1 percent at $1.3543, near its four-month low of $1.3487 touched on Tuesday. Sterling has slumped in the past fortnight as investors reversed expectations of a rate hike at Thursday's BoE meeting.
The dollar rose 0.1 percent versus the Japanese currency to 109.22 yen, off its three-month high of 110.05 yen.
The yen, while suffering a big drop in recent weeks, has been supported by short-covering by Japanese margin traders, especially against the Turkish lira, which fell to record lows during Japan's Golden Week holidays.
The lira fell more than 4 percent last week versus the dollar.
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