Greece's debt problems continued to weigh on the euro, boosting the dollar to a 6-month high against the common currency Thursday, while a surprising jump in U.S. unemployment claims sent a painful reminder that jobs are still scarce.
Meanwhile, China declared it is over the global crisis and said economic growth has accelerated, but signaled that inflation is a concern. Analysts have said they expect Beijing to take new steps to control credit through tighter restrictions on lending and ordering banks to set aside still more reserves following an increase last week.
The low-yielding dollar tends to benefit on economic news that points to instability as traders forsake riskier stocks, commodities and emerging-market currencies for bets on the safety of the U.S. currency.
The 16-nation euro edged lower to $1.4103 in late afternoon trading in New York from $1.4108 late Wednesday. It traded as low as $1.4028, its lowest point since last July. As recently as early December, the euro was trading above $1.50.
The British pound, meanwhile, traded at $1.6209 compared with $1.6287, while the dollar bought 90.38 Japanese yen from 91.21 yen late Wednesday in New York.
Europe is gripped by concerns over debt levels for some of the weaker members in the eurozone, particularly Greece and Ireland, fueling speculation that they will face tough fiscal measures, such as spending cutbacks and higher taxes, that would limit growth in coming years.
Officials, however, have said Greece should be able to deal with its debt crisis and that they are not worried about a default, although bond markets suggest the risk of a default has increased.
Meanwhile, the Labor Department said Thursday that workers filing for unemployment benefits for the first time rose by 36,000 to 482,000 last week. Economists polled by Thomson Reuters were expecting a small drop. The four-week average rose for the first time since August.
The report provided a grim reminder that while the economy might have improved modestly, a robust recovery is unlikely until companies start adding jobs. The unemployment rate remained at 10 percent last month.
A separate report that seeks to forecast future economic activity offered a more positive outlook. The Conference Board's index of leading economic indicators jumped 1.1 percent in December, suggesting that economic growth could pick up this spring.
"All indicators point higher, which argues in favor of a more broad-based recovery than the market currently anticipates," Michael Woolfolk, senior currency strategist at Bank of New York Mellon, wrote in a client note. "If so, the Fed may turn in favor of normalizing interest rates sooner than expected in order to limit the formation of asset price bubbles."
The Federal Reserve has indicated that continuing high unemployment and slack in the economy, along with subdued inflation, would allow it to leave interest rates at the current range near zero for a long time.
Low rates can weigh on a currency because they mean smaller returns on assets denominated in that currency. High rates, or the expectation of increasing rates, can bolster a currency as investors transfer funds in search of higher yields.
In other late afternoon trading, the dollar advanced to 1.0502 Canadian dollars from 1.0472 late Wednesday, but slipped to 1.0415 Swiss francs from 1.0437 francs.