The dollar edged higher against a basket of major currencies on Friday, extending its recovery from a three-year low last week, as the potential for a more aggressive U.S. Federal Reserve prompted investors to pare bearish bets against the greenback.
The dollar index, which measures the greenback against a basket of six other major currencies, was up 0.17 percent at 89.89. The index hit a three-year low of 88.253 on Feb 16.
Rising Treasury yields, a view that the dollar's sell-off had been overdone, and minutes from the Fed's January rate-setting meeting that offered a relatively upbeat tone helped the index notch a gain of 0.9 percent this week.
"You have seen sentiment around the dollar shift," said Charles Tomes, senior investment analyst and trader at Manulife Asset Management, in Boston.
"A lot of market participants are taking some risk off the table if they did have longs in other strategies," he said.
Federal Reserve Chair Jerome Powell's first semi-annual testimony to Congress on Tuesday will be watched for any update on the central bank's economic forecasts.
"If investors were short the U.S. dollar, they don't want to take on that risk in case he is more hawkish," Tomes said.