The dollar bounced on Thursday from levels not touched since March 2018 to its highest in a week as investors looked at the potential for an economic rebound in upcoming quarters and investors who had been betting on the euro took profits.
The dollar index, which measures the U.S. currency against a basket of peers, rose 0.53% at 89.785 after climbing as high as 89.979, with the euro down 0.43% to $1.2272.
The dollar had little movement on Wednesday as hundreds of President Donald Trump's supporters stormed the U.S. Capitol in a bid to overturn his election defeat, battling police in the hallways and delaying for hours the certification of Democratic President-elect Joe Biden's victory.
Biden's victory has raised expectations for more fiscal stimulus measures to bolster the economic outlook and lifted longer-dated bond yields, with the benchmark 10-year Treasury's yield climbing above 1% on Wednesday for the first time since March. On Thursday, the yield reached a high of 1.088%.
"Once the rates start to move, as they did yesterday, it wasn't a big move but it was in the right direction, that is the direction of the future," said Joseph Trevisani, senior analyst at FXStreet.com.
"It's debatable on how long it is going to take for the vaccines to work and hopefully end the pandemic but once that happens, you are going to get a much stronger U.S. recovery and that will lead to a stronger dollar."
Economic data on Thursday, however, underscored a stalling labor market, although a gauge of activity in the services industry quickened in December.
Still, many analysts maintain a weaker long-term outlook for the dollar and see the recent advance as the unwinding of bearish bets against the greenback, after it fell nearly 7% in 2020 and as much as 0.9% in the new year.
The yuan edged lower at 6.47 per dollar after Chinese authorities signaled a desire for a slower pace of gains.
The remarks by the State Administration of Foreign Exchange on Wednesday follow an advance of around 10% on the greenback since last May as China's economic rebound has led the world's pandemic recovery.
Sterling was last trading at $1.3568, down 0.29% on the day as it continued to slip below the near three-year high of $1.3703 touched on Monday.
Bitcoin marked a fresh all-time high, topping $40,000 on Thursday, and was last up 6.24% at $39,148.91.