NEW YORK (Reuters) – The dollar was flat to slightly higher on Monday in choppy trading after falling sharply on disappointing U.S. jobs data last week, as investors continued to see a faster U.S. recovery than in most countries and were also focused on rallying crypto currencies after Tesla announced a $1.5 billion investment in bitcoin.
The dollar index was at 91.033, =USD, up 0.05% on the day. On Friday, it fell as low as 90.981 after data showed the U.S. economy created fewer jobs than expected in January and job losses in December were greater than initially reported.
“We view Friday’s non-farm payrolls report as a speed bump rather than a roadblock for the emerging growth divergence narrative,” Mark McCormick, global head of FX strategy at TD Securities in Toronto, said in a research note.
“Stepping back from this single report, we still see growth expectations moving in the U.S.’ favor, especially versus Europe. Since the end of the first lockdowns last year, the U.S., Japan, and Canada are the lone G10 countries to have seen growth expectations rise for next year,” he added.
Speculators have been reducing short positions – bets the dollar will weaken – on the currency. Some analysts have flagged the likelihood that the same speculators will be forced out of their short positions by a rise in the dollar.
Net bearish bets on the dollar by speculators fell to $29.95 billion for the week ended Feb. 2, compared with a net short position of $33.81 billion for the previous week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data.
Francesco Pesole, FX strategist at ING, said that even if the U.S. dollar recovery stalls, “we could continue to see evidence of a USD short squeeze in the coming weeks.”
The euro was down modestly at $1.2037 against the dollar.
In a note to clients, J.P. Morgan strategists said they “have growing confidence of underperformance of EUR vs USD.”
Investor morale in the euro zone unexpectedly fell in February as lockdowns to suppress the COVID-19 caseload left their mark on the economy, which lost touch with other regions in the world as they recovered further, a survey by Sentix showed.
Sentix’s investor sentiment index for the euro zone fell into negative territory, dropping to -0.2 from 1.3 in January. A Reuters poll had pointed to a reading of 1.9.
The British pound bought $1.3732, little changed against the dollar.
The dollar was quoted at 105.215 yen, having pulled back from a three-month high reached on Friday.
In the cryptocurrency market, bitcoin hit another record high of $44,899 after Tesla Inc said on Monday it had invested around $1.5 billion in the virtual currency and expects to begin accepting payment with it for its cars and other products in the near future..
Bitcoin was last up 11.7% at 43,345.
Ethereum ETH=BTSP hit a record high of $1,779.43 after the listing of futures for the cryptocurrency on the Chicago Mercantile Exchange late Sunday. It was last up 6.55% at $1,722.91.
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