Early trade in New York: dollar climbs to 5-month against currencies basket

The dollar rose to a five-month high against a basket of major currencies on Friday, helped by weakness in the euro as investors fretted about political uncertainty in Italy. The dollar index has gained for five straight sessions and is on track for a 1.3 percent weekly gain. It has risen 5 percent since mid-February, with investors betting US interest rates will need to rise further to curb inflation.
Shaun Osborne, chief FX strategist at Scotiabank in Toronto, however, believes the dollar's rally was more about extreme short positioning that needed to unwind. "We continue to view dollar gains as a temporary issue reflecting excessive short positioning and concerns European growth momentum has slowed and may impair the ECB's (European Central Bank) willingness to move away from quantitative easing later this year."
The euro on Friday was headed for its fifth successive weekly decline versus the dollar, its first such fall since 2015. Europe's single currency has fallen about seven cents in three weeks amid a sharp dollar rally and concerns about the outlook for Italy's next government. In mid-morning trading, the euro fell to a five-month low of $1.1753. It has declined nearly 1.2 percent versus the dollar this week and dropped against the Swiss franc, which typically attracts capital in times of uncertainty.
On Friday, the dollar set a fresh four-month high against the yen and was up 0.1 percent, buoyed by a further rise in US Treasury yields that suggests an upbeat outlook for the world's largest economy.