The dollar hit two-week highs against a basket of currencies in choppy trading on Thursday as investors reduced bearish bets on the greenback, though many in the market saw the rally fast losing momentum.
Analysts suggested this latest dollar strength was just a one-off bounce in the currency's overall bear market trend, driven in part by an improving near-term U.S. fundamental picture. A selloff across global stock markets since late Friday and bets that the United States could see at least three interest rate hikes in 2018 have driven the dollar up in recent days.
The greenback has gained around 1.3 percent against its basket in the past week, on track to post its largest weekly gain since late October after rising in four of the last five sessions.
John Taylor, Jr., president and founder of global macro and FX research firm Taylor Global Vision was not too convinced about the dollar's strength for most of this week.
"The bounce in the dollar is already nearing an end. The feeble move higher in dollar pairs like the dollar/Mexican peso and the dollar/South African rand highlights the distaste for the U.S. currency," he added.
In late afternoon trading, the dollar index was up 0.04 percent on the day at 90.30.
"We expect any bounces are likely to be short-lived and offer better levels to sell," said Mark McCormick, North American head of FX strategy, at TD Securities in Toronto.
This belief ties in with a Reuters poll of strategists who said the dollar's rebound was unlikely to be sustainable.
The euro was down 0.11 percent at $1.2248, after earlier falling to a two-week low. The single currency has declined 2.6 percent since hitting a three-year high of around $1.2536 just 10 days ago.
"The market is in consolidation mode," said Commerzbank currency strategist Esther Reichelt in Frankfurt. "The dollar performed relatively well during the stock market turmoil, and this experience determined the market sentiment going forward."
Traditional safe havens such as the and Swiss franc, meanwhile, have seen only modest gains during the recent stock market volatility. But on Thursday, the dollar was both down against the Swiss franc and yen.
Higher U.S. yields also underpinned the greenback's recent rally. The yield on benchmark 10-year Treasury notes stood at 2.867 percent, compared with its U.S. close of 2.843 percent on Wednesday.