On Friday, the US dollar was set to post the worst weekly performance of 2021 as its safe haven appeal dims following the release of unexpectedly optimistic economic data out of Europe despite the third wave of the pandemic underway. At the time of writing, the US dollar index DXY is trading around 92.27.

Even though several European countries have imposed lockdowns and restrictions to combat the recent surge in fresh coronavirus cases, the Euro is set to post its highest weekly gains against the greenback. The unexpected bullish moves came on the back of an increase in the Eurozone PPI – an indicator of improving business conditions and economic outlook.

After trading bullish for several sessions, the US dollar has also weakened following a dip in US Treasury yields. The benchmark 10-year US Treasury yields have fallen to the lowest level seen in two weeks after having touched a 14-month high last week, which in turn have dragged the reserve currency lower as well.

Investors have also turned away from the greenback following the release of the Fed’s latest policy meeting minutes which revealed a cautious and dovish outlook among officials despite encouraging signs of economic recovery. In addition, an improvement in the overall risk appetite in financial markets has further dimmed the dollar’s appeal against other riskier instruments, the biggest gainers of this move being the AUD and the NZD.