Aussie dollar soars on unexpected improvement in jobless data
By Deborah Levine & Lisa Twaronite, MarketWatch
NEW YORK (MarketWatch) -- The dollar slipped against major counterparts on Thursday, falling versus the euro after the European Central Bank said the economy in the euro zone is showing signs of stability and inflation expectations are firmly anchored.
The dollar also declined versus the British pound after the Bank of England stuck with its current lending rate and asset-purchase program.
The euro bought $1.4760, near the highest in at least a year and up from $1.4689 in late U.S. trading Wednesday. The British pound rose to $1.6070, up from $1.5953.
The dollar index (DXY 76.13, -0.37, -0.48%) , a measure of the greenback against a trade-weighted basket of currencies, recently traded at 76.049, down from 76.455 in late trading Wednesday.
The dollar slipped to 88.49 yen, from 88.54 yen late Wednesday.
European Central Bank President Jean-Claude Trichet also said the economic recovery will be "uneven." Of more interest to currency markets, he specifically said a strong dollar policy from the U.S. is important.
"The comments came in response to a question on the strength of the euro and show that the ECB is keeping a very close eye on developments," said analysts at Action Economics. "However, the fact that the main statement did not refer to the euro and that the ECB still expects an improvement in exports suggests that the ECB is unlikely to plan anything more than a certain amount of verbal intervention to keep the euro down for now.
Trichet's comments in a press conference followed the central bank's decision to keep its key lending rate at 1% as widely expected.
The Bank of England left its key lending rate unchanged at a record-low 0.5% and made no changes to its 175 billion pound ($278 billion) money-printing program of asset purchases. See full story.
As for news from the other side of the Atlantic, the dollar remained lower versus major rivals on Thursday after the Labor Department said initial claims for state unemployment benefits fell by 33,000 to a seasonally-adjusted 521,000 in the week ending Oct. 3. Economists surveyed by MarketWatch expected claims to decline by less, to 540,000.
Australian gains
Australia's unemployment rate fell to a better-than-expected seasonally-adjusted 5.7% in September from 5.8% in August, the Australian Bureau of Statistics said Thursday, underscoring the economic improvement that prompted that country's central bank to raise interest rates this week. Read more on Australian jobless data.
Following the jobs report, the Australian currency hit a fresh 14-month high, according to FactSet Research data, as investors priced in the probability of more interest-rate hikes ahead. On Tuesday, the Reserve Bank of Australia became the first nation among the Group of 20 to raise interest rates. See full story on Australian rate hike.
The Aussie dollar was trading up almost 1.8% from Wednesday at 90.37 U.S. cents, rising above 90 cents for the first time since August 2008.
The dollar's slide against Asian currencies is "being slowed by intervention, but consolidation or rallies are opportunities to establish or add to" bets on further dollar declines, said Patrick Bennett, forex strategist with Société Générale, in emailed comments.
Central banks in South Korea, Taiwan and the Philippines have all reportedly been intervening in the market, selling their currencies for dollars in order to stem appreciation.
Stronger currencies pressure export-oriented economies because they erode the value of repatriated overseas profits and also make goods less competitive in export markets.
