The dollar wiped out this year's losses over the past 2 months following a barrage of strong economic data

• The dollar has surged over the past two months thanks to strong economic data.
• One gauge of the greenback's strength has rallied 5% since July 13.

The dollar has enjoyed a remarkable turnaround over the past two months, wiping out all of its losses for 2023 following a slew of economic data signaling that the US won't suffer a long-predicted recession.

The US Dollar Index, which measures the greenback against a basket of six currencies, has rallied by 5% since July 13 and nearly 1% over the past five trading sessions alone.

On Thursday, the gauge hit a six-month high after data released the previous day showed service-sector activity expanded more than forecasters expected in August.

Those figures were just the latest in a long line of strong data points from the past two months, with inflation cooling to 3.2% in July and unemployment holding steady at under 4% in August.

The economic winning streak sets the dollar apart from its competitors – with China's ongoing post-lockdown struggles making the buck a more attractive investment than the renminbi, according to IG analyst Axel Rudolph.

Signs of weakness in China's own services sector dragged the yuan to a 16-year low and "helped push the greenback to fresh six-month highs on flight-to-quality flows," he said in a research note this week.

The dollar may also have benefited from speculation that the Federal Reserve isn't yet done with its battle against soaring prices.

About 40% of traders expect the central bank to raise interest rates again before the end of 2023, according to the CME Group's Fedwatch tool, which boosts the greenback's appeal to foreign investors seeking juicier yields.