Investing.com - The euro pared back gains against the dollar in choppy trade on Thursday as a spike in German bund yields abated, while slightly-better-than expected U.S. jobs data buoyed up the dollar.
EUR/USD was last at 1.1275, unchanged for the day and off the two-week highs of 1.1380 set earlier Thursday.
The euro gave up gains as the yield on German 10-year bunds fell back after jumping to the highest level since September earlier in the day.
German bund yields act as benchmarks for European financial markets and higher yields push the euro higher against the dollar. Yields rise as prices fall.
The rally in bund yields came a day after European Central Bank President Mario Draghi said that investors should get used to higher debt market volatility.
Speaking after the ECB voted to keep interest rates on hold at a record low on Wednesday Mario Draghi said markets should get used to periods of higher volatility in European bond markets, which he said won’t affect monetary policy decisions.
The euro received an additional boost after the ECB revised up its inflation forecast for this year to 0.3% from zero previously and said that inflation rates were expected to pick up further during 2016 and 2017.
The revision came after the latest inflation data on Tuesday showed that euro zone consumer prices rose for the first time in six months in May.
The ECB also said it saw no reason add more monetary stimulus following the recent rally in European bond yields.
The euro had briefly turned lower early Thursday as jitters over the prospects of a Greek default weighed.
Talks between Greek Prime Minister Alexis Tsipras and European Commission President Jean-Claude Juncker in Brussels late Wednesday ended without an agreement to unlock more financial aid before the country runs out of money.
However the two sides were said to be close to a deal and were expected to hold further talks on Friday.
Greece is due to make a €305 million payment to the International Monetary Fund on Friday and its bailout program is set to expire later this month.
The euro backed off five-month highs against the yen, with EUR/JPY last at 140.27 after rising to peaks of 141.06 earlier.
The dollar edged higher against the yen, with USD/JPY at 124.41, holding below Tuesday’s 12-and-a-half year peaks of 125.05.
The dollar found some support after the Labor Department reported that the number of people filing for initial jobless benefits in the U.S. last week fell by a larger-than-forecast 8,000 to 276,000.
Investors were looking ahead to Friday’s government nonfarm payrolls report for a fresh indication of the strength of the recovery in the labor market, which the Federal Reserve has said will be a key factor in deciding when to hike interest rates.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was unchanged for the day at 95.35.