The dollar rose on Friday, putting it on track for its strongest week against a basket of currencies in nearly 15 months as some traders piled into the greenback in a week of tremendous swings felt in stock and bond markets around the world.
The U.S. currency stemmed its protracted decline this week. Some traders have bought it to close out their bets on its weakness, while others favored the dollar in a safe-haven move over higher-returning but riskier currencies, analysts said.
"Overall, its just a highly volatile environment where the idiosyncratic things that drive (the market) - fundamentals, economic data are taking second stage. Everything is becoming much more correlated in a very volatile environment," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
The dramatic moves in equities and bonds this week were stoked by concerns about signs of inflation amid an improving global backdrop and speculation whether the Federal Reserve and other major central banks would act quicker to raise interest rates. Equity and bond market volatility has surged this week. While foreign exchange markets have been calmer, the turbulence was enough to upend some popular trades, analysts said.
Betting on the dollar weakening against the euro has been one of them, with an expanding euro zone economy stoking expectations the European Central Bank will shrink its balance sheet sooner than expected.
The single currency was last down 0.10 percent at $1.2233, marking its steepest weekly decline since November 2016, Reuters data showed.
The greenback stabilized versus safe-haven currencies after Thursday's decline. It rebounded from a four-month low to 108.78 , up 0.04 percent. It was up 0.44 percent at $0.9399 Swiss franc.
Against a basket of six major currencies, the greenback was up 0.17 percent at 90.38.
On the week, the dollar index has risen 1.41 percent for its best week in almost 15 months. The dollar's advance was supported by some stabilization in U.S. stock prices, a day after heavy selling sank the Dow and into correction territory.
The bond market also calmed from its wild moves earlier this week. Benchmark 10-year Treasury yield was 1 basis point lower on the day at 2.838 percent, which was below a four-year peak of 2.885 percent on Monday. The dollar also received support after Congress and U.S. President Donald Trump approved a federal budget plan that ended an overnight federal shutdown.