The dollar held near 3-month highs against the euro on Thursday, benefiting from sustained strength in core U.S. inflation and weak data out of Europe.
The dollar was on track for its longest winning streak in two years on Tuesday, as hopes of a breakthrough in U.S-China trade talks and a tentative deal to avoid a U.S. government shutdown encouraged investors to cover short bets on the currency.
At the end of 2018, the dollar was the consensus short trade among hedge funds, as traders bet the U.S. Federal Reserve would pause in its rate increases and other major economies would grow quickly.
But while the Fed held interest rates steady last month, the case for buying the euro and the pound has weakened steadily. Economic data in Europe have deteriorated and Brexit concerns have dogged the British pound.
“It is remarkable for the dollar to post this kind of rising streak after a dovish Fed last month, and it shows how cautious investors are becoming over the outlook of the global economy,” said Lee Hardman, a currency strategist at MUFG in London. The dollar has gained for nine consecutive sessions, its longest series of gains since February 2017, according to Refinitiv data. It was a touch higher at 97.063 on Tuesday.
On Jan. 30, the Fed said it would be “patient” before raising rates again and signalled its balance sheet would remain larger than previously expected.
Talks resumed in Beijing this week after an earlier round ended in Washington last week without a deal, and the top U.S. negotiator said a lot remained to be done.
In the U.S lawmakers reached a tentative agreement on border- security funding that might help avert another government shutdown, due to start on Saturday.
Reuters news contributed to this report