NEW YORK (MarketWatch) — The dollar continued to rise Thursday, gaining 1.4% on the euro in the aftermath of a weaker-than-expected report on U.S. jobless claims that added to concerns about the pace of global economic growth.

This followed subpar data from China and Europe and come a day after Federal Reserve Chairman Ben Bernanke downgraded U.S. growth prospects.

The euro /quotes/zigman/4867933/sampled EURUSD -1.4400%  traded at $1.41, from $1.4360 late Wednesday. just after the jobless claims report, it fell as much as 1.4%.

The dollar index /quotes/zigman/1652083 DXY +0.80% , which measures the performance of the U.S. unit against a basket of six major currencies, rose to 75.610 from 74.791 late Wednesday. see real-time currency quotes and tools.

Fed cuts growth forecast

Federal Reserve chief Ben Bernanke says the U.S. economy’s recovering more slowly than expected, but central bank officials gave no indication about whether they intend to take new steps.

The greenback extended gains after the Labor Department said 429,000 filed first-time claims for unemployment benefits last week, more than economists had expected. Read more on U.S. first-time and continuing jobless claims.

Risk appetite was further damaged, weighing on the euro and the Australian dollar, after a preliminary June purchasing managers index reading for China’s manufacturing sector fell more than expected, to 50.1, just above the 50.0 no-growth level. Read about China’s PMI reading.

A steeper-than-expected drop in the Markit euro-zone composite PMI reading to a 20-month low was also a factor, strategists said. see more about euro-zone PMI.

“The major concern for markets remains the depth and length of the current ‘soft patch,’ ” said Mitul Kotecha, head of global foreign-exchange strategy at Credit Agricole.

“The Fed believes it will be temporary and we concur, but clearly the slide in equity markets over recent weeks suggests that there has been a divergence between stock market expectations and reality,” he said in a note to clients Thursday.

Bernanke and Trichet

The greenback won support Wednesday from safe-haven seekers, after Bernanke emphasized the slow pace of the U.S. recovery and euro-zone debt concerns, prompting weakness in U.S. equities that carried over into most Asian markets and European equities on Thursday. Bernanke and the Fed offered no indication the central bank was weighing additional stimulus measures. Read more on Bernanke.

Also Wednesday, the Federal Open Market Committee voted to keep its targeted Fed funds rate between 0% and 0.25% by unanimous vote, and confirmed it would hold its record $2.8 trillion balance sheet steady by reinvesting the securities that mature. But Bernanke didn’t signal that any further easing was on the near-term horizon, which gave the dollar a lift.

“The prospect of a third round of quantitative easing still appears to be a distant one, with the Fed statement offering no hints that this was being considered,” said Simon Smith, chief economist at FxPro in London.

“With the Fed knocking down its growth projection, it appears the market feels vindicated in its caution over recent weeks,” he said.

Remarks by the president of the European Central Bank President were also a factor, analysts said.

Jean-Claude Trichet, speaking late Wednesday in his role as head of the European Systemic Risk Board, which oversees macro-prudential stability on behalf of the European Union, said the interplay between the euro zone’s banking system and public finances in some member states is “the most serious threat to financial stability” in the region, according to Dow Jones Newswires.

Among other major currencies, the British pound /quotes/zigman/4867886/sampled GBPUSD -0.7826%  changed hands at $1.5982, down from $1.6101.

Against the Japanese yen, the dollar /quotes/zigman/4868099/sampled USDJPY +0.5045%  rose to ¥80.70 from ¥80.33 Wednesday.

The Australian dollar /quotes/zigman/4867876/sampled AUDUSD -0.9918%  fell to $1.0484 from $1.0512.

/quotes/zigman/4867933/sampled /quotes/zigman/1652083 /quotes/zigman/4867886/sampled /quotes/zigman/4868099/sampled /quotes/zigman/4867876/sampled

Deborah Levine is a MarketWatch reporter, based in New York. William L. Watts in Frankfurt and Lisa Twaronite in Tokyo contributed to this report.

Related posts:

1. Currencies: Dollar hits 16-month low against the euro, pound
2. Currencies: Dollar slips vs. euro in Asian trading
3. Currencies: Euro rises 15-month high against the U.S. dollar
4. Currencies: Dollar up vs. euro, Moody’s cut Ireland
5. Currencies: Dollar gains on euro, edges down vs yen

Comments are closed.