The greenback fell to a two-week low on Thursday due to a fall in U.S. Treasury yields and as a surprise rise in U.S. jobless claims triggered broad-based weakness in usd.
Reuters reported the number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but the increase likely understated the rapidly improving labor market conditions as more parts of the economy reopen and fiscal stimulus kicks in. The second straight weekly increase in claims reported by the Labor Department on Thursday was at odds with reports this month showing the economy created 916,000 jobs in March, the most in seven months, and job openings increased to a two-year high in February. Initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 744,000 for the week ended April 3 compared to 728,000 in the prior week. Data for the prior week was revised to show 9,000 more applications received than previously reported.
Versus the Japanese yen, dollar met renewed selling at 109.90 at Asian open and dropped to 109.45 in European morning. Intra-day decline accelerated ahead of New York open and fell to a 2-week low at 109.01 at New York open on falling U.S. yields and downbeat U.S. jobless claims data. Later, the pair staged a short-covering rebound to 109.31 near New York close.
Although euro rebounded from Asian low at 1.1861 to 1.1892 in early European morning, price retreated to 1.1862 in Europe. The pair then found renewed buying there and rose to a fresh 2-week high of 1.1927 in New York midday on usd's broad-based weakness as well as improved risk appetite due to rise in U.S. stocks before moving sideways.
The British pound traded with a firm bias in Asia and gained to session highs at 1.3782 in early European morning before falling to a 1-week low at 1.3720 in Europe. The pair then rebounded to 1.3773 at New York open on usd's weakness before retreating again to 1.3724 on cross-selling of sterling.
In other news, Reuters reported Federal Reserve Chair Jerome Powell said Thursday that a surge in spending as the U.S. economy reopens, along with bottlenecks in supply, will likely push prices higher this year, but would not result in the kind of year after year price rises that would constitute inflation.
"We think there will be upward pressure on prices which may be passed along to consumers in the form of price increases - we think that that will be temporary," Powell said at an International Monetary Fund event, noting that inflation has been low for 25 years, feeding into a psychology of low inflation expectations. "If inflation were unexpectedly, counter to our expectations, to move meaningfully above levels where we are comfortable - and in particular inflation expectations... if we see them moving persistently and materially above levels we are comfortable with, then we would react to that."
Data to be released on Friday:
Australia services index, China PPI, CPI, Swiss unemployment, Germany industrial output, exports, imports, trade balance, current account, France industrial output, UK house prices, Italy retail sales, Canada employment change, unemployment rate, U.S. PPI, wholesale inventory and wholesale sales.
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