AUGUST 19, 2010, 4:28 P.M. ET
By Frances McInnis Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The dollar gained against the euro and most other higher-yielding currencies Thursday after deepening fears about the country's slow pace of recovery sent investors to traditional safe harbors.
Disappointing U.S. employment and manufacturing data weighed on U.S. equity markets and led to losses for currencies closely tied to global growth, such as the Australian, New Zealand and Canadian dollars.
"In general, there's a lack of conviction" in currency markets, as poor U.S. data has investors wondering whether further deterioration in the U.S. economy is ahead, said Alvise Marino, foreign exchange strategist at Credit Suisse in New York.
"Investors are unwilling to pile into positions, until they see where the economy is going," he said.
Low summer trading volumes may have exacerbated intraday currency movements, analysts said.
Late Thursday, the euro was at $1.2820 from $1.2860 late Wednesday, according to EBS via CQG. The dollar was at Y85.29 from Y85.43 after falling as low as Y84.89. The euro was at Y109.40 from Y109.87. The U.K. pound was at $1.5606 from $1.5605. The dollar was at CHF1.0325 from CHF1.0420.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.437 from 82.259.
To see the euro's performance against the dollar, please see:
http://dowjoneswebservices.com/chart/view/4458
The Philadelphia Fed index fell to -7.7 in August compared to 5.1 in July, and economists' expectations of a 7.0 reading.
U.S. initial unemployment claims also disappointed, rising by 12,000 to 500,000 in the week ended Aug. 14. It was the highest level since Nov. 14, and further stoked fears about the country's already weak labor market.
The rise in claims was particularly troubling because, with no seasonal factors affecting the week's results, economists had expected to see a decline. In previous weeks, analysts said data were likely distorted by seasonal adjustment factors tied to factory shutdowns by car makers and the hiring and firing of temporary workers for the 2010 Census.
The Canadian, Australian and New Zealand dollars all fell following the release of the data. Regional factors such as weak wholesale sales in Canada, rising input prices in New Zealand and the news that Fitch Ratings and Standard and Poor's placed mining giant BHP Billiton's A+ rating on watch also weighed on the commodity-backed dollar bloc.
The greenback's losses against the yen after the U.S. data were likely limited by talk of possible intervention by Japan to stop the appreciation of the yen that is causing alarm among Japanese exporters, said Hidetoshi Yanagihara, currency strategist at Mizuho Corporate Bank in New York.
"Everybody will think about the possibility of the intervention," he said, noting there has been no clear signal from Japanese authorities on future action.
Still, speculation continues that the Bank of Japan may intervene in currency markets or ease monetary policy should the yen rise further or government pressure increase.
Separately, the Malaysian ringgit surged to a near 13-year high and may scale new heights in the next few months after the country's central bank eased foreign exchange rules further by allowing companies to use the currency to settle international trade, dealers said.
Adding fresh impetus to the currency's move, China started trading the Malaysian ringgit against the yuan on its domestic interbank foreign exchange market Thursday, as part of its efforts to internationalize the Chinese currency and boost cross-border trade.
With the ICE Dollar Index strengthening, Deutsche Bank's PowerShares U.S. Dollar Index Bearish exchange-traded fund was down 0.19% from late Wednesday, while its PowerShares U.S. Dollar Index Bullish was up 0.21%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of the ICE's Dollar Index.
-By Frances McInnis, Dow Jones Newswires; 212-416-3417; frances.mcinnis@dowjones.com
(Elffie Chew in Kuala Lumpur contributed to this article.)
From The Wall Street Journal published on AUGUST 19, 2010, 4:28 P.M. ET