Home Forex Dollar drops on U.S. weekly jobless claims

Dollar drops on U.S. weekly jobless claims

by Jonathan Adams

The dollar index was down 0.35% at 92.091, its lowest since March 23

The U.S. dollar slipped to a two-week low against a basket of currencies on Thursday, tracking Treasury yields lower, after data showed a surprise spike in U.S. weekly jobless claims.

While the rise likely understates rapidly improving labour 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 down 0.35% 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 picked up 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 signalled 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 a rise in COVID-19 cases could slow the recovery.

The benchmark 10-year Treasury yield was near 1.632% on Thursday, after slipping below 1.63% overnight. It reached 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.

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