Investing.com - The U.S. dollar traded sharply higher against its major rivals Thursday, as strong U.S. data fuelled dollar demand, while fading hopes for European Central Bank action to stem the debt crisis in the euro zone hit demand for higher yielding assets.
During U.S. afternoon trade, the dollar was higher against the euro, with EUR/USD falling 0.65% to 1.2285.
Powering the greenback , the Department of Labor said the number of people who filed for unemployment assistance in the U.S. declined to 361,000 last week, from an upwardly revised 367,000 in the previous week, against expectations for an increase to 370,000.
A separate report indicated the U.S. trade deficit dropped to USD42.9 billion in June, its lowest level in two-and-a-half years from a downwardly revised USD48.0 billion the previous month.
Analysts had expected a trade deficit of USD47.5 billion in June.
Sentiment on the euro was hit as optimism that the ECB will soon move to cut high Spanish and Italian borrowing costs faded as investors waited for more details of the bank’s proposed bond buying program to emerge.
Earlier Thursday, the ECB said in its monthly bulletin that the economic outlook for the euro zone faced a number of downside risks, with financial market tensions and their potential impact on growth posing the key threats.
The euro had been slightly higher against the greenback earlier, as risk assets were buoyed up by prospects for further monetary stimulus by China after official data showed that consumer inflation slowed in July.
The greenback was also higher against the pound, with GBP/USD slipping 0.22% to 1.5622.
In the U.K., official data showed that the trade deficit jumped to GBP10.1 billion in June, up from GBP8.36 billion in May, on the back of a 7% drop in exports.
Analysts had expected the trade deficit to tick up to GBP8.6 billion in June.
The data came one day after the Bank of England said that the U.K. economy would barely grow this year and cut its forecasts for the coming years in its quarterly inflation report.
Elsewhere, the greenback pushed higher against the yen and the Swiss franc, with USD/JPY rising 0.31% to hit 78.64, and USD/CHF adding 0.46% to trade at 0.9758.
The Bank of Japan left monetary policy unchanged earlier, in a widely anticipated decision and indicated that it would not implement additional stimulus measures unless the yen continued to appreciate.
The greenback was mixed against its Canadian, Australian and New Zealand counterparts, with USD/CAD sliding 0.27% to 0.9915, AUD/USD edging up 0.13% to 1.0582 and NZD/USD falling 0.29% to 0.8122.
The Canadian dollar shrugged off official data showing that the trade deficit unexpectedly increased to CAD1.8 billion in June, from an upwardly revised CAD0.9 billion the previous month.
On Wednesday, Bank of Canada Governor Mark Carney said the country’s economy was in a "very different place" than many of its global counterparts and indicated that the central bank may raise interest rates in the coming months.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.42% to 82.75.