The dollar got a boost last week, with the currency climbing to a near four-month high after the yield on the 10-year U.S. Treasury note crossed the 3 percent level.
The dollar index, which tracks the greenback against six of its peers, gained more than 1.3 percent in the previous week.
Some expect the currency to lift further in the week ahead following its recent gains.
“The loss of momentum in the world economy is supportive of the dollar because it is a ‘counter-cyclical currency,'” said Joseph Capurso, senior currency strategist at Commonwealth Bank of Australia, in a Monday note. He pointed to how data out of the euro zone and the U.K. had missed expectations whereas U.S. economic data had surpassed projections.
Expectations about inflation are also set to play a role in the dollar’s move higher, Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, said in a note.
“[S]teady growth and rising inflation expectations should foster further gains in the dollar … as investors are convinced that the Federal Reserve will use the May meeting to prepare the market for a June hike,” Lien said.
Ahead, the Federal Open Market Committee’s May policy meeting and the release of nonfarm payrolls later this week will likely be in focus.
