The dollar began the last quarter of 2021 near its highest levels of the year, and was headed for its best week since June as investors expected a
hawkish-sounding Federal Reserve to lift U.S. interest rates sooner than its major peers.
Cautious market sentiment due to COVID-19 concerns, wobbles in China's growth and a Washington gridlock ahead of a looming deadline to lift the U.S. government's borrowing limit also lent support to the dollar which is seen as a safe-haven asset.
The dollar index stood at 94.287, having gained 1.1% so far this week, the largest weekly rise since late June.
The euro was steady on Friday at $1.1578, but has fallen about 1.3% during the week, and through major support around $1.16, to touch its lowest levels since July 2020.
The yen bounced from a 19-month low overnight but has lost 0.6% for the week and twice as much in a fortnight as a rise in U.S. Treasury yields has drawn flows from Japan into dollars. It last traded at 111.21 per dollar.
Benchmark 10-year Treasury yields are up for a sixth straight week and real 10-year yields, discounted for inflation, are rising far more quickly than counterparts in Europe.
Markets in Hong Kong and China are closed on Friday. Later in the day, traders are awaiting U.S. personal spending and core consumption deflator data and nervously watching for any progress on the debate over raising the U.S. debt ceiling.
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