* U.S. Midwest business contracts less than expected
* U.S. weekly jobless claims decrease in the latest week
* U.S. data suggests economy will recover later this year
(Recasts, updates prices, adds details)
By Nick Olivari
NEW YORK, April 30 (Reuters) - The dollar reversed early
gains to trade lower against most major currencies on Thursday
as trading thinned ahead of the May Day holiday through much of
Europe.
The dollar had climbed in early trade, helped by month-end
flows as investors who had been betting against the dollar were
forced to buy greenbacks as the release of some positive U.S.
economic data suggested the economy will recover later this
year.
But as European trading desks began to close for a long
weekend, those gains evaporated.
"We have seen the movements we are going to see for this
week," said Joseph Trevisani, chief market analyst at FX
Solutions in Saddle River, New Jersey.
The euro was last down 0.1 percent at $1.3252 <EUR=>, after
earlier climbing as high as $1.3384.
A rise in euro zone unemployment to 8.9 percent in March
from an upwardly revised 8.7 percent in February underlined the
view that the euro zone economy remains weak. Other data showed
that euro zone inflation remained at a record low of 0.6
percent year-on-year in April
The dollar was 1.3 percent higher against the yen at 98.26
yen <JPY=> but 0.9 percent lower against the Canadian dollar at
C$1.1938 <CAD=>. Sterling climbed 0.3 percent to $1.4811
<GBP=>.
Earlier, the dollar had climbed on expectations the U.S.
will recover first, with investors sending the U.S. stock
market higher. The benchmark Standard & Poors 500 index <.SPX>
was on track for the best month since December 1991 at current
prices.
U.S. weekly jobless claims decreased in the latest period
even as continued claims notched a fresh record high, a sign
some investors took as stabilization of the labor market. A
separate report showed business activity in the U.S. Midwest
contracted at a less severe rate than expected in April.
"A lot of what's driving the market today is month-end
fixing flows," said Brian Dolan, chief currency strategist at
Forex.com in Bedminster, New Jersey.
U.S. assets such as stocks had outperformed in April and
investors looking to book profits and rebalance their
portfolios had gone short the dollar in anticipation of selling
dollars.
"But the market had got so short the dollar in anticipation
of this, and a subsequent rally caught people wrong-sided,"
Dolan said.
U.S. DATA
The U.S. data was key to foreign exchange markets early in
the New York session, analysts said.
Other government data showed the weak U.S. job market
continued to pressure incomes and spending in March though
investors saw more they liked than cause for concern.
"The longer we have stability -- no matter what level you
have stability at -- if you have stability, that's the
precursor to recovery," said Trevisani. "People had been
trading on bad U.S. news and that had been pretty evident and
you didn't get it today."
Christina Romer, chairwoman of the White House Council of
Economic Advisers, said in testimony prepared for delivery to
the Joint Economic Committee of the U.S. Congress on Thursday
said that she saw glimmers of hope that the economy was
stabilizing, but it was "hard to know" if a recovery would get
underway later this year as expected or take longer.
[]
Moves were also exaggerated by thin market conditions ahead
of the start of the Golden Week Holiday in Japan.
(Additional reporting by Steven C. Johnson and Wanfeng Zhou in
New York) (Reporting by Nick Olivari; Editing by Diane Craft)
