Dollar weakens after unemployment claims rise

AP News
Posted: Apr 14, 2011 3:22 PM
Dollar weakens after unemployment claims rise

The dollar fell against most major currencies after a government report showed that unemployment benefits in the U.S. rose unexpectedly.

The Labor Department said Thursday that applications for unemployment benefits rose 27,000 to a seasonally adjusted 412,000 last week. Economists expected a drop in claims.

The euro rose to $1.4490 in late afternoon trading Thursday in New York, from $1.4441 late Wednesday.

The euro has risen about 1.3 percent against the dollar since the European Central Bank raised its key interest rate a week ago. Central banks raise interest rates to curb inflation. Higher rates also tend to increase demand for the currency linked to that country or region.

Analysts have said that the Federal Reserve's reluctance to raise rates has put pressure on the dollar. The U.S. central bank has kept its benchmark rate near zero since December 2008.

Joseph Trevisani, chief market analyst at FX Solutions, said the euro should have jumped even higher against the dollar after the European Central Bank rate hike, however, the market continues to be wary of whether the European debt crisis is under control.

On Thursday, Greek borrowing costs rose as investors worried over whether the country will have to restructure its debt. Both Greece and Ireland received hefty financial aid packages last year, and Portugal is due to receive one this year.

In other trading, the British pound rose to $1.6353 from $1.6274. The dollar fell to 83.54 Japanese yen from 83.82 yen, and fell to 0.8925 Swiss franc from 0.8963 Swiss franc.

The U.S. dollar was also lower against most other currencies around the world, including ones in Canada, Australia, Hong Kong and Latin America.