NEW YORK (Reuters) – The U.S. dollar dipped to a two-week low against a basket of currencies on Thursday, tracking Treasury yields lower, after data showed a surprise rise in U.S. weekly jobless claims.
While the increase likely understates rapidly improving labor market conditions as more parts of the U.S. economy reopen and fiscal stimulus kicks in, it was bad enough to knock down the greenback.
The dollar index measuring the greenback against a basket of six currencies was 0.35% lower at 92.091, its lowest since March 23.
Thursday’s data followed the release in the previous session of minutes from the Federal Reserve’s March policy meeting, which showed Fed officials remained cautious about the risks of the pandemic – even as the U.S. recovery gathered steam amid the massive stimulus – and committed to providing monetary policy support.
“With the job market moving in the wrong direction, it underscored this week’s Fed minutes that emphasized how the economy was far from what the Fed considers to be healthy,” Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, said in a note.
“Data that reinforces the Fed’s dovish stance is likely to keep Treasury yields and the dollar anchored,” he said.
On Thursday, Federal Reserve Chair Jerome Powell signaled the central bank is nowhere near to reducing its support for the U.S. economy, noting that an expected rise in prices this year is likely to be temporary, and warning that an uptick in COVID-19 cases could slow the recovery.
The benchmark 10-year Treasury yield was around 1.632% on Thursday, after dipping below 1.63% overnight. It hit 1.776% late last month, its highest in more than a year.
The U.S. currency – which appreciated this year, helped in part by a rally in U.S. Treasury yields – has come under pressure in recent sessions as yields have retreated.
With Treasury yields diminishing the greenback’s relative appeal, the yen rose to a two-week high against the U.S. currency.
Sterling steadied against the dollar to trade about flat on the day, stanching its recent losses after a bruising bout of profit-taking, with traders optimistic about its near-term prospects after a strong start to the year.
With the jobless claims data weighing on the greenback, the Canadian dollar edged higher, recovering from a one-week low.
(Reporting by Saqib Iqbal Ahmed and Ritvik Carvalho; additional reporting by Kevin Buckland in Tokyo; Editing by Larry King, Jonathan Oatis and Dan Grebler)