Euro zone business activity unexpectedly grew this month, a preliminary survey showed, but with much of Europe suffering a third wave of coronavirus infections and renewed lockdown measures, that may not last through April.
The PMI saw the dollar index pull back from a four-month high of 92.608 hit in early London trade, trading at the 92.454 mark around midday.
After falling 4% in the last quarter of 2020, the dollar has strengthened by nearly 2.5% year-to-date as investors expect the broad rise in US bond yields to weigh on stretched equity valuations and boost demand for the US currency.
The dollar index stood at 92.30 against a basket of six major currencies, up 0.4%, its highest level since late-November.
If you do see volatility the natural inclination is to take risk off the table, in this case it just basically means getting out of existing positions and the dollar shorts are extremely elevated at this point.
Short US dollar positions were last at $29.33 billion, according to data by the Commodity Futures Trading Commission.