Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The euro and the commodities-influenced currencies erased their overnight losses Thursday morning after investors said U.S. weekly jobless claims data wasn't as bad as they first appeared, fueling a surge in demand for stocks and other riskier assets.
The euro recovered to as high as $1.3655, gaining more than 1 cent off its lows of the day. The New Zealand and Australian currencies also moved higher against other currencies. The U.S. dollar index, which tracks the greenback against a trade-weighted basket of six currencies, fell, trading near its intraday low.
At first, an ongoing flight to the perceived safety of the dollar and the yen intensified as a knee-jerk reaction to data that showed U.S. initial claims for jobless benefits in the U.S. rose by 31,000 to 473,000 in the week ended Feb. 13. Economists had forecast an increase of only 5,000.
Thursday's claims report reflects the data collected during the week that blizzards dumped record amounts of snow on many U.S. cities along the East Coast. Snow blanketing Washington, D.C., forced the federal government to shut down for several days.
"The jobless claims number initially looked like pretty bad...but we find it very hard to believe that the weather didn't have an impact," said Jacob Oubina, a currency analyst at Forex.com in Bedminster, N.J. "Also, there's some profit-taking going on after the pretty significant decline in the euro."
The Dow Jones Industrial Average was slightly higher, while oil, silver and copper moved up after dropping sharply overnight.
Investor appetite for growth-sensitive assets also got a boost from better-than-expected data reported by the Federal Reserve Bank of Philadelphia. Mid-Atlantic manufacturers posted better-than-expected improvement this month, paced by new orders, the data showed. The Philadelphia bank said its index of general business activity within the factory sector increased to 17.6 in February, from a reading of 15.2 in January.
The yen remained the best performer among major currencies after the Bank of Japan left key interest rates unchanged, but said it was "very important for the Japanese economy to overcome" deflation, or a persistent decline in consumer prices.
"This suggests that further policy measures from the BOJ may be in the offing in the months ahead," said Jane Foley, a research director at Forex.com in London.
Thursday morning in New York, the euro was at $1.3636 from $1.3607 late Wednesday, according to EBS via CQG. The dollar was at Y90.91 from Y91.20, while the euro was at Y123.97 from Y124.10. The U.K. pound was at $1.5653 from $1.5680. The dollar was at CHF1.0766 from CHF1.0780.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.297 from 80.435.
Despite the rebound, the euro remains under pressure and confined to its recent trading ranges.
"The sovereign debt issue [in Europe] is still hanging over the market like the sword of Damocles and is not likely to go away," said Michael Hewson, a currency analyst at CMC Markets in London. "This problem will continue to weigh on the euro."
The European Union wants Greece to impose at least EUR2 billion in spending cuts and tax increases to narrow its huge budget deficit, but Athens fears possible unrest if it takes further austerity measures, say people familiar with the Greek government's thinking.
The euro has been choppy against the Swiss franc, with several brief spikes higher during the New York morning. The sudden but short-lived moves higher had their starting points around CHF1.4645, the intraday low and roughly the level where the SNB last week is suspected to have entered the market to stop the franc's appreciation. However, traders said there hasn't been any indication of SNB presence in the market Thursday, although the euro has been volatile versus the franc. The euro is now trading at CHF1.4671.
Adding to jitters about the fiscal health of countries in Europe, the U.K. government Thursday said the public sector borrowed more than expected in January, with tax revenue falling significantly and central government spending also higher. It borrowed a net GBP4.3 billion in January, compared with a net repayment of GBP5.3 billion a year earlier. This was also the first time since records began in 1993 that there was a net borrowing requirement in January.
In other currencies, the Russian central bank moved the ruble's trading band lower Thursday for the first time since November, allowing the currency to gain record strength.
The ruble strengthened to a 13-month high of RUB34.91 against a euro-dollar currency basket, moving past the RUB35.00 level previously seen as the threshold of the floating trading band set by the central bank.
Copyright (c) 2010 Dow Jones & Company, Inc.
May The Force Be With You.
Eddie's Free Forex Class