By James Ramage
The dollar rose against its rivals on Thursday as a weekly gauge
of the U.S. labor market revived optimism among investors.
The market has been sensitive to jobs data this week as it
anticipates the April nonfarm payrolls report, a key metric watched
by the Federal Reserve in determining when to adjust interest
rates. On Wednesday, the dollar fell on a surprisingly weak April
private-sector jobs report compiled by Automatic Data Processing
Inc. and Moody's Analytics.
But on Thursday, the Labor Department said initial jobless
claims rose by 3,000 to a seasonally adjusted 265,000 in the week
ended May 2, which was below economists' forecasts and just above
last week's 15-year low. Investors saw the data as a sign that the
labor market was weathering the uneven recovery of the U.S.
economy.
The dollar advanced 0.7% against the euro, with one euro buying
$1.1265.
The dollar rose 0.3% against the yen to Yen119.83, sticking to
the Yen116-Yen122 range it has held this year.
The Wall Street Journal Dollar Index, which tracks the greenback
against a basket of commonly traded currencies, rose 0.5% to 85.30,
backing away from a two-month low it reached Wednesday.
"The dollar rebounded from a 10-week low against the euro after
the latest jobless claims fared better than expected and suggested
the labor market was holding up solidly in the face of an otherwise
sluggish economy," said Joe Manimbo, senior market analyst at
Western Union, in a research note.
Weak signals from the U.S. economy have shaken investors'
confidence that the Federal Reserve would raise interest rates
before the end of the year. Many investors had piled into the
dollar with expectations that the Fed would raise rates by midyear,
which in turn would lure yield-hungry investors to the greenback
for higher returns.
Over the past week, the dollar's stumble coincided with the
reversal of other popular trades in the financial markets, ranging
from lower German and U.S. bond yields to higher European equities
to falling oil prices. The sudden unwinding of such one-sided
investor positioning has roiled markets at a time when global
inflation pressures are rising and growth forecasts in Europe are
slowly improving.
"The hurdle for a specific catalyst to cause a large correction
is much lower when the market is so aggressively positioned in one
direction," said Shahab Jalinoos, currency research analyst at
Credit Suisse.
In other trade, the British pound slipped 0.2% against the
dollar to $1.5215 as British citizens took to the polls Thursday to
elect a government. The uncertainty surrounding the election's
outcome has led to volatile trading in the pound over the past two
months.
Write to James Ramage at james.ramage@wsj.com
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