By John Geddie and Patrick Graham

LONDON, April 10 (Reuters) – The euro sank back below $ 1.06 on Friday, capping a bullish few days for the dollar that have put it on course for a first weekly rise in a month and hinted at another push towards parity with the single currency.

U.S. jobless claims data on Thursday eased concern about the state of the economy and the mood music from Federal Reserve officials has also restated the case for raising interest rates this year, long before its European and Japanese peers.

Against a basket of currencies, the dollar rose almost half a percent to a three-week high in morning trade in Europe, bolstered by diverging bond yields in the U.S. and euro zone that should pull capital into the world’s largest economy.

“The latest data now suggests that the U.S. economy is rebounding after a very weak start to the year,” said BTM-UFJ currency economist Lee Hardman.

“The general story is still that the U.S. looks well positioned to outperform … There is still scope for the dollar to strengthen further.”

The dollar index rose 0.4 percent to 99.481, its highest since March 19.

Dealers said dollar-buying by longer-term investors helped drive the move for euro, down 0.7 percent at $ 1.0583, its weakest since March 19. The single currency has fallen more than 3 percent this week.

“It is certainly reasonable at this stage that we have seen some consolidation, given the scale of the move in the dollar (in the past six months),” said Sandra Cowl, a member of the investment committee at French asset manager Carmignac Gestion.

“The speculative community has been very long dollars and there has to be some clearing out of those positions. But the structural strengthening of the dollar will continue.”

Much attention in a relatively sedate week for major currency markets has focused on Britain’s May 7 elections, set to generate a potentially destabilising period of negotiations to form a government.

The cost of hedging against volatile moves in the pound around the vote has risen steadily since the start of the year and finally begun to show up in spot rates of sterling as well.

Polls showing the Labour party moving in front, allied to soft industrial output data, helped send sterling to a five-year low of $ 1.4604, with dealers saying there was support from an options barrier at $ 1.4600.

“A $ 1.40 level for sterling/dollar is certainly not out of reach if the election aftermath turns ugly,” said Standard Bank currency strategist Steve Barrow. ($ 1 = 0.9447 euros) (Editing by Tom Heneghan)