The dollar index was 0.14% higher at 104.29, up from a four-month low of 103.64 it hit on Wednesday
The dollar gained in choppy trading on Friday, as a global cyber outage that hit banks, airlines and broadcasters unsettled investors, although volatility in the currency market remained contained.
Risk appetite has recoiled this week, affecting technology stocks in particular, while expectations for an interest rate cut as early as September from the Fed have impacted the dollar, especially against low-interest rate currencies such as the yen and the Swiss franc.
The huge gap between U.S. rates and those in Japan and even in Switzerland has created an opportunity for investors to sell those currencies to fund purchases of assets with higher returns such as the dollar, tech stocks or crypto currencies.
The yen has also advanced after suspected official buying last week from Japanese authorities, and wariness of more of the same was in the mix on Friday.
There is a bit of a carry unwind going on and the Swissie has traded notably stronger this week as well, according to Pepperstone senior analyst Michael Brown.
The carry unwind is perhaps part of a wider momentum unwind that we are seeing – the tech sector has taken a bit of a battering in four out of the past five days as well, he added.
The yen, which is set for a gain of 0.7% this week, was a touch stronger at 157.23 per dollar, after data showed inflation in Japan rose for a second month.
The yen has dropped more than 10% against the dollar this year, mostly down to the wide difference in interest rates between the U.S. and Japan, and reached 38-year lows at the beginning of the month, triggering action from Tokyo.
While suspected interventions do not seem to stabilise the yen, we believe monetary policy might, according to Krishna Bhimavarapu, APAC economist at State Street Global Advisors.
The pound, which this week reached a one-year high above $1.30, dropped 0.12% on the day to $1.2926, after data showed UK retail sales declined more than expected in June, when cold, wet weather deterred shoppers from hitting the high street.
The dollar index was 0.14% higher at 104.29, up from a four-month low of 103.64 it hit on Wednesday. The index is set for a 0.2% gain for the week after two weeks of losses.
The Swiss franc softened by 0.12% to trade at 0.8887 francs, but was still set for a weekly gain of around 1%.
