NEW YORK/LONDON: The US dollar was on course on Friday for a second week of gains after a turbulent few days when currencies were buffeted by shifting risk appetite, with the market's focus now on next week's Federal Reserve meeting. Some analysts wondered, though, whether the dollar's recent rally may be losing momentum.

The dollar index, which measures the greenback against a basket of six major currencies, was slightly higher on the day at 92.877. For the week, it is up 0.2%, after rising 0.6% previously.

But that was off a 3-1/2-month high of 93.194 hit on Wednesday, after strong Wall Street earnings helped investors regain some confidence amid earlier worries that the Delta coronavirus variant could derail the global recovery.

Risk appetite among investors remained high on Friday, with US stocks rising, US Treasuries selling off, most commodity currencies well-bid on the day, and the greenback off its peaks.

"The dollar looks tired especially after the rally of the last few weeks," said Erik Nelson, macro strategist, at Wells Fargo Securities in New York. "It seems to be running out of steam both from a fundamental and technical perspective."

So far in July, the dollar has gained 0.6%, after rising 2.8% in June.

Wells Fargo's Nelson, however, was not convinced the dollar could hold its gains in the coming weeks given the decline in US Treasury yields.

Since the beginning of July, US benchmark 10-year Treasury yields have lost 16 basis points, on track for their largest monthly fall since March 2020.

"You had a huge move lower in US rates. I also think the Fed is going to be one of the laggards among central banks normalizing policy," Nelson said.

The market's next major focus is the Fed's two-day policy meeting next week. Since the previous meeting on June 16, when Fed officials dropped a reference to the coronavirus as a weight on the economy, cases have risen.

Many economists, however, still expect the meeting to advance discussions for a tapering of stimulus.

Against the safe-harbour yen, the dollar rose 0.3% to 110.53 yen. Meanwhile, the euro was down 0.1% at $1.1763, showing little reaction to the purchasing manager surveys coming out of France, Germany and the euro zone as a whole.

Euro zone business activity expanded at its fastest monthly pace in over two decades in July as the loosening of more COVID-19 restrictions gave a boost to services, but fears of another wave of infections hit business confidence.

The data came in the wake of the European Central Bank's meeting on Thursday, in which it pledged to keep interest rates at record lows for even longer. The Australian dollar - viewed as a proxy for risk appetite - slid 0.1% to US$0.7374, heading for a fourth straight weekly loss.

With half the Australian population under lockdown, economists said the country's central bank could increase stimulus rather than decrease it at its next policy meeting.