NEW YORK (Dow Jones)-- Dollar demand remains supported Monday morning, pushing the U.S. currency to several intraday highs.
The dollar advanced to a one-week high against the euro, as the market continued to unwind the near-record amount of short positions in the U.S. unit following a stronger-than-expected U.S. payrolls report Friday.
The euro is also breaking below closely watched technical levels, which sends the common currency lower, said analysts.
The U.K. pound also fell to a fresh one-week low, and is falling even faster than the euro, after the Bank of England last week expanded its gilt-buying program and as technical analysts point to continued vulnerability.
BNP Paribas, along with other currency research analysts, suggest selling the pound on the U.K.'s economic uncertainties.
The dollar's gains Monday extend a sharp rally Friday.
"Friday was a watershed day," said John McCarthy, manager of currency trading at ING Capital Markets in New York, referring to the dollar's rally off of positive U.S. data for the first time since the financial crisis shifted trading strategies.
Usually, as a safe-haven asset and lower-yielding currency, the dollar had declined throughout the past two years against riskier, higher-yielding currencies, such as the euro, when spurts of positive data boosted market sentiment - even if it is was positive U.S. data.
But this time the dollar was bought on interest-rate expectations and economic fundamentals, something that hadn't happened since the world's major central banks began their aggressive easing campaigns.
Traders "are still testing that...and there's been a bit of demand for dollars," said McCarthy.
The euro fell as low as $1.4129, while the pound fell to a low of $1.6520.
Pound weakness helped the euro rise to a session high of GBP0.8569.
The dollar gained to a session high of CHF1.0871 earlier, and is nearing a high versus the yen.
Monday morning in New York, the euro was at $1.4142 from $1.4169 late Friday. The dollar was at Y97.37 from Y97.48, according to EBS. The euro was at Y137.70 from Y138.20. The pound was at $1.6510 from $1.6671. The dollar was at CHF1.0854 from CHF1.0825.
"The labor market data's strong effect may have been associated with the widely-held view that the Fed is not going to start tightening policy while the unemployment rate continues to climb," said analyst at Barclays Capital.
That's why Wednesday's Federal Open Market Committee meeting is so important this week.
"What would be negative for the U.S. dollar is if Fed officials don't follow up with more hawkish/less dovish commentary," said analysts at UBS.
Also key will be how the dollar responds to U.S. retail sales data Thursday and industrial production and consumer confidence data Friday.
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