Afternoon Forex Overview

Previous session overview

The euro rose to an 11-week high at above USD1.31 Thursday after improving euro-zone economic data contrasted with festering worries that the U.S. economy is slowing.

The dollar traded at its lowest point in three months against a trade-weighted basket of its competitors as investors, worried over the lack of pace in U.S. growth, turned away from the greenback.

A better-than-expected reading of U.S. weekly jobless claims failed to extinguish the worry, as the previous week's claims were revised upward, signaling little improvement in the labor sector and keeping the dollar under pressure. The Labor Department announced initial claims for jobless benefits declined by 11,000 to 457,000 in the week ended July 24.

The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 81.556 from 82.132. The index traded at its lowest level since late April.

Separately, the Reserve Bank of New Zealand Thursday lifted the Official Cash Rate by 25 basis points to 3.0% after a similar increase last month, but the cautious tone of the statement has firmed up expectations there will be a pause in the hiking cycle later in the year. The New Zealand dollar fell slightly against the greenback on the cautious tone of the statement.

Market expectation

The euro continues to benefit from easing concerns over the region's sovereign-debt crisis. The worst of that crisis has likely passed, and there are signs of confidence returning, though some countries will still face deficit-related problems, analysts.

Analysts warned that the euro is likely to enjoy continued support over the near-term, especially if U.S. data remains weak, its gains may prove limited if concerns about a slowing U.S. economy widen to include the broader global economy.