The dollar rally won’t quit.
The greenback rose against most of its major peers Friday, brushing off a U.S. labor-market report that missed expectations in terms of job growth, although the unemployment rate fell to the lowest since 2000. The currency is poised to rise for the third straight week, with the Bloomberg dollar index gaining almost 3 percent since the start of April and almost wiping out its 2018 declines.
Investors betting on dollar weakness have been left wrongfooted by its climb. Shorting the currency was the second-most crowded trade across financial markets, according to an April survey of fund managers by BofA Merrill Lynch Global Research. For some traders, it’s time to exit those bearish positions.
“Positioning in short U.S. dollars is still somewhat stretched and that has been the key,” said Bipan Rai, a foreign-exchange and macro strategist at Canadian Imperial Bank of Commerce. “Outside of the U.S., there are genuine concerns about whether or not growth is synchronous, and by extension, you have markets reassessing prior views. That means squaring up of U.S. dollar shorts.”
The dollar gained 0.5 percent to $1.1927 per euro as of 11:20 a.m. in New York. It was little changed at 109.20 yen.
While some aspects of Friday’s employment report were weaker than anticipated, U.S. economic indicators have remained relatively solid in recent weeks, in contrast with weaker European data on inflation and private-sector activity.
HSBC Holdings Plc has turned bullish on the dollar, calling for it to rally to $1.15 per euro by year-end on the view that the Federal Reserve will outpace its peers in raising rates. That compares with a median forecast for it to weaken to $1.26 per euro, according to a Bloomberg survey.
“The dollar deserved to have a surge based on economic performance — it finally got it,” said Juan Perez, senior foreign-exchange trader and strategist at Tempus Inc. in Washington. “Divergence with Europe and U.K. is particularly clear after the slew of data this week.”