(Corrects first paragraph to clarify German data was a key
business confidence measure)
(Recasts; updates prices, adds comments)
By Vivianne Rodrigues
NEW YORK, April 24 (Reuters) - The dollar rose broadly on
Thursday after government data showed signs of resilience in
the U.S. labor market, while a key business confidence measure
in Germany plunged, weighing on the European currency.
Falling demand for the euro in the past two sessions came
as the currency traded above a record $1.60 on Tuesday, its
highest level since its inception in 1999. Traders and
investors bought the currency betting the next move by the
European Central Bank would be a hike on benchmark
interest-rates.
Still, ECB policy makers' comments on excess volatility in
euro trading combined with soft economic data this week,
dampened such expectations and triggered a sell off in the
currency, analysts said.
"Now that we tried and failed to stay above $1.60 in
eurodollar, it looks like we're coming back to the bottom,"
said Brian Dolan, head of research at consultancy Forex.com, in
Bedminster, New Jersey. "The U.S. data today is pretty clearly
dollar positive and we're coming off some weaker European
data."
The number of U.S. workers filing initial claims for
unemployment benefits unexpectedly fell last week, the
government said. For details, see ID:[] In contrast,
a reading on German business sentiment showed the biggest
monthly fall since September 2001. The headline Ifo index fell
to a much lower-than-expected 102.4 in April, its lowest since
January 2006.
In midday trading in New York, the euro was down 1.4
percent at $1.5666 <EUR=>, nearly 3 cents below Tuesday's
record highs and at its lowest in at least two weeks.
Upside potential in eurodollar is now "quite limited,"
Manuel Oliveri, a currency analyst at UBS AG in Zurich said in
a note. The bank forecasts the pair will trade at 1.55 in one
month and at 1.47 in three months.
The European currency was also down 0.5 percent at 163.39
yen <EURJPY=>, while the dollar was up 0.9 percent at 104.29
yen <JPY=>.
The Ifo, coupled with a slump in euro zone manufacturing
PMI to near-economic-contraction levels on Wednesday, suggested
that the euro zone may not be immune to a U.S.-led economic
slowdown.
The data poured cold water on nascent market expectations
of a ECB interest rate hike this year, which have been fueled
by recent hawkish comments ECB policy makers. Still, ECB
president Jean-Claude Trichet said on Thursday that there is
concern about the impact of currency fluctuations on financial
stability.
"If anyone was punting (betting) on a rate hike sometime
this year from the ECB, the Ifo would have certainly reduced
the chances," said Adarsh Sinha, currency strategist at
Barclays Capital in London.
The dollar was also up 1 percent against a basket of six
major currencies at 72.506 <.DXY>.
The dollar's gains also come as investors look closely at
whether or not the Federal Reserve might be ready to pause in
its aggressive run of interest rate cuts after an expected
quarter-percentage-point trim next week to 2.0 percent.
The U.S. central bank has slashed 3 percentage points from
borrowing costs since September in an effort to stave off
recession.
A report on weak new U.S. home sales in March failed to
provide lasting clues on the outlook for interest rates,
analysts said.
"I don't think the market view (on the U.S. rate outlook)
will change dramatically just on this number," said Matthew
Strauss, senior currency strategist at RBC Capital Markets in
Toronto.
(Additional reporting by Steven C. Johnson and Lucia Mutikani
in New York and Toni Vorobyova in London; Editing by Gary
Crosse)
