The US dollar consolidated gains on Friday but was set for its biggest weekly rise in nearly four months as an overnight plunge in high-flying US technology stocks fuelled a bout of risk aversion in global markets.
The Nasdaq led the pullback with a decline of almost 5% a day after it and the S&P 500 posted record closing highs. It was the third-biggest one-day fall from a record close and the big losses boosted demand for the greenback's safe-haven status.[.N]
"Near-term, if this correction in big tech continues, it will impact overall risk and fuel further demand for the dollar," Mizuho strategists said in a note.
The dollar's bounce this week comes after weeks of losses which saw the greenback fall to a April 2018 low of 91.74 on Tuesday after the US central bank overhauled its policy framework last week, which would allow it to keep rates lower for longer periods, a negative for the dollar.
Against a basket of currencies, the dollar was trading at 92.774 in early London trading. On a weekly basis, it was up 0.6%, its biggest weekly rise since mid-May.
Data due later on Friday is expected to show US non-farm payrolls grew by 1.4 million in August, which would be slower than the 1.763 million jobs created in the previous month.
There are growing signs the labour market recovery from the depths of the pandemic is faltering, with financial support from the government virtually depleted.
The dollar's downtrend will continue for at least another three months due to the outlook for the Fed's monetary policy, a Reuters poll of analysts showed on Friday.
The dollar's bounce clipped the wings of the soaring euro which briefly hit more than 2-year highs above $1.20 this week. It was trading broadly flat at $1.1845 on Friday.
The Antipodean currencies initially fell slightly, tracking the broader loss of investor confidence as a sell-off in U.S. tech shares hit Asian stocks and a closely-watched measure of market volatility hit a 10-week high.
The Australian dollar steadied at $0.7277, supported after local retail sales accelerated in July.