Early on Friday, the US dollar trades strong against other leading currencies, making the most of the risk-off mood in global markets over rising concerns that the rampant spread of COVID-19 infections due to the delta variant could derail economic recovery worldwide. At the time of writing, the US dollar index DXY is trading around 93.67.

The decline in market sentiment has hit riskier currencies especially hard, with the Canadian dollar falling to the lowest level seen since six months against the greenback. Meanwhile, the common currency has plunged to the lowest levels seen in almost 10 months, while other leading commodity currencies AUD and NZD hold close to nine month lows against the USD.

In addition to the sentiment, the US dollar is also enjoying support from rising expectations of the Fed starting to taper its asset purchase program sooner than originally planned. With the US economic recovery gathering pace and the labor market also showing signs of improvement lately, bets are that the Fed could announce a timeline for the process during the upcoming Jackson Hole symposium and possibly even start tapering before the end of this year.

There is also hope that the official figures for US GDP for Q2 2021 could be revised higher on the back of strong economic data releases. While the advance estimate anticipated a growth of 6.5% for the US economy between April and June, the Commerce Department’s quarterly services survey (QSS) suggests a higher reading for the GDP, which in turn could drive up investor confidence in the US economy as well as the dollar.

The US dollar has also been boosted after the latest weekly jobless claims report revealed that the number of Americans filing for fresh unemployment benefits dropped to the lowest levels seen in 17 months. According to the data released by the Labor Department, weekly unemployment claims fell by 29,000 since the previous week’s reading to 348,000, the lowest reading seen since March 2020.