The dollar rose against the euro, pound and yen Thursday after several reports suggested the U.S. economy is still growing. That eased fears of a recession.
Worries about the future of a rescue fund for indebted European countries and the region's weakening manufacturing sector weighed on the euro.
The day before a major report on U.S. employment, the Labor Department said the number of people applying for jobless aid for the first time fell to 409,000 last week. Claims remain higher than what's considered healthy in a strong jobs market, however. Economists say the number of applications needs to drop below 375,000 for sustainable job growth.
Some analysts say that if job growth grinds to a halt, the Federal Reserve may start a new round of bond purchases as soon as September. Buying up bonds to support the economy could lower interest rates, which would likely weigh on the dollar.
Other reports also gave investors some hope. An industry report on manufacturing showed U.S. factories grew for the 25th month in a row. Economists had expected a decline. The Institute for Supply Management's index dropped to 50.6 in August, which suggests slow expansion. A level above 50 signals growth. Manufacturing has been one of the bright spots in the recovery.
A string of parallel manufacturing surveys in Europe showed that manufacturing sectors of most major economies there are shrinking. Germany, the region's powerhouse, is just barely growing.
Also on Thursday, major U.S. retailers posted big revenue increases in August, a key back-to-school shopping month. Consumer spending makes up 70 percent of the U.S. economy.
In late Thursday trading in New York, the euro fell to $1.4273 from $1.4380. A key expansion of the bailout fund designed to help the region's most indebted countries remains in limbo as government leaders discuss final terms of the deal. Individual countries must approve the deal agreed to by European leaders in July.
The British pound dropped to $1.6178 from $1.6244. The dollar edged up to 76.78 Japanese yen from 76.60 yen, but fell to 0.7942 Swiss franc from 0.8048 franc. The dollar also slipped to 97.55 Canadian cents from 97.95 cents.