By William L. Watts, MarketWatch
LONDON (MarketWatch) -- The U.S. dollar was weaker versus most major rivals Thursday, pressured by an apparent round of month- and year-end position squaring on the final day of 2009.
The dollar index (DXY 77.52, -0.39, -0.50%) , a measure of the greenback against a trade-weighted basket of major rivals, slipped 0.6% to 77.468. A dollar rally in recent weeks has seen the index post a 3.5% December rise, but the gauge remains on track for a 4.6% yearly loss.
For the year, the dollar has lost ground against every major currency except the Japanese yen, said Kathy Lien, director of currency research at GFT.
The euro jumped 0.5% against the dollar to change hands at $1.4405. The euro began the month trading above the $1.50 level versus the dollar, before beginning a plunge that took it toward $1.42. The euro began the year trading near $1.40 versus the dollar, slipping below $1.25 in early March as equities tumbled to their lows, then rising strongly in lockstep with shares as they rebounded.
The U.S. dollar, meanwhile, maintained an inverse relationship with equities, tumbling as investors' appetite for risk was on the rise. That relationship appeared to weaken toward the end of the year.
With no major data on tap and thin holiday trading conditions prevailing in most markets, Friday's moves appeared to stem largely from year-end squaring up, said Daragh Maher, currency strategist at Calyon.
That said, the dollar's December rebound has lost pace over the last seven days, calling into question ideas the greenback was poised to begin 2010 on track for big gains, Maher said.
The release of December U.S. non-farm payrolls data on Jan. 8 will go a long way toward setting the tone for the dollar, but the greenback may be in line for some near-term weakness until then, he said.
Weekly jobless claims data are set for release Thursday at 8:30 a.m. Eastern time. Economists expect claims of 455,000, up from 452,000 the previous week, according to a MarketWatch survey.
The dollar edged down versus the Japanese yen, losing 0.1% to trade at 92.35 yen. The dollar had notched a two-month high versus the Japanese currency on Wednesday, helped in part by worries about Japan's credit rating.
Neil Mellor, currency strategist at Bank of New York Mellon, warned that the Japanese government must be more forthcoming about how it plans to tackle its growing debt burden or face growing nervousness over the potential for a ratings downgrade.
"If, as we suspect, fiscal considerations are indeed becoming a more prominent consideration for the foreign exchange markets, then the Japanese yen would hardly appear to be particularly well positioned going into 2010," Mellor said.
The British pound was 0.7% higher versus the U.S. dollar at $1.6192, after breaking below the $1.60 level last week.
Mortgage lender Nationwide on Thursday said British house prices rose 0.4% in December, bringing the yearly rise to 5.9%. Read about British house prices.
"Once cable (the British pound/U.S. dollar cross) had broken back above $1.5930 the move was all one way and we are now sitting above $1.6100 with everyone wondering what all the bearish worry was about," said Simon Denham, strategist at Capital Spreads.
The pound has posted "something of a recovery" against all the majors in the past couple days, though the main move Wednesday "was definitely one of dollar and yen weakness," Denham said.
