NEW YORK (Reuters) - The dollar rose against a basket of peers on Friday and was on pace to finish the week at its strongest since mid-November, as commodity-linked currencies fell following a slump in oil prices and as political concerns in Italy and Spain hurt the euro.
The dollar index .DXY, which measures the greenback against a basket of six currencies, was up 0.44 percent at 94.166, after hitting a high of 94.249, its strongest since mid-November. The index was up 0.6 percent for the week.
Oil prices fell about $2 on Friday as Saudi Arabia and Russia discussed easing supply curbs that have helped push crude prices to their highest since 2014.
“We are seeing a bit of a rebound on the crosses, particularly against the commodity-linked currencies,” said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments.
“That’s really, really helping support the U.S. dollar on a trade-weighted basis,” he said.
The U.S. dollar was 0.75 percent higher against the Canadian dollar, a more than two-week high. The Australian dollar was 0.37 percent lower against the greenback.
The dollar had been rising for weeks but lost some of its momentum after the Federal Reserve minutes on Wednesday were seen as more dovish than markets had expected.
On Friday, the dollar was supported by data showing new orders for key U.S.-made capital goods increased more than expected in April and shipments rebounded, suggesting that business spending on equipment was picking up after slowing down at the end of the first quarter.
Meanwhile, the euro weakened and was set for a sixth consecutive week of losses as rising bond yields in Italy triggered nervousness among investors, while brewing political instability in Spain also weighed on sentiment.
Spain’s socialist leader Pedro Sanchez on Friday said his party would call a snap election if it won the motion it put forward against Prime Minister Mariano Rajoy over a graft case involving members of his People’s Party.
The news sparked a sharp sell-off in Spanish bonds and stocks, and provided investors with a fresh incentive to get out of Italian assets, which have been rattled by the prospect of a spendthrift coalition government comprising the anti-establishment 5-Star Movement and far-right League.
“Risk premia are rising across the euro area,” said Schamotta. “Market participants are taking the threat of divisions in the euro area more seriously than they have in a long time.”
Sterling traded near a five-month low of $1.33 on Friday, hindered by worries over Brexit and further signs of sustained weakness in Britain’s economy.
Reporting by Saqib Iqbal Ahmed; Editing by Nick Zieminski and Bernadette Baum