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FOREX-Dollar up as risk appetite fades, Swiss franc steady

Published 06/25/2009, 12:36 PM
Updated 06/25/2009, 12:42 PM

* Rise in jobless claims dampens risk appetite

* Dollar broadly higher, a day after FOMC meeting

* Swiss franc steady, market nervous about intervention (Updates prices, adds quotes, details)

By Wanfeng Zhou

NEW YORK, June 25 (Reuters) - The dollar rose against major currencies on Thursday as an unexpected rise in U.S. jobless claims data dampened risk appetite and boosted safe-haven demand for the greenback.

The Swiss franc fell earlier versus both the euro and dollar as traders cited more talk of the Swiss National Bank selling francs for euros and dollars, possibly via the Bank for International Settlements. Both the SNB and BIS declined to comment.

Investors continued to digest the Federal Reserve's statement released a day earlier. The dollar rose sharply after the Fed on Wednesday made no mention of plans to step up quantitative easing, which some traders considered to be a downside risk to the dollar.

"The jobless claims data today was a little bit troubling for the idea that things are going to start improving from here," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. "Risk appetite pulled back a bit."

Government data showed on Thursday the number of U.S. workers filing new claims for jobless benefits unexpectedly rose last week, while the number staying on the rolls also edged higher.

In midday New York trading, the ICE Futures' U.S. dollar index, which tracks the value of the greenback against a basket of six major currencies, was up 0.1 percent at 80.621, off a roughly two-week low of 79.562 hit on Wednesday.

The euro was up 0.1 percent at $1.3942, after hitting a two-week high of $1.4138 on Wednesday in the run-up to the Fed meeting. The dollar rose about 0.6 percent to 96.23 yen.

Despite U.S. equities moving higher on Thursday, Sacha Tihanyi, currency strategist at Scotia Capital in Toronto, said "I don't get a sense of strong optimism in the market, and as a result we have some dollar support today."

Separately, the government said on Thursday the U.S. economy shrank slightly less in early 2009 than previously thought. But the upward revision was more than offset by the disappointing claims report, which renewed some worries about the economy.

The Fed on Wednesday "essentially told us they had no reason to begin an exit strategy for their massive quantitative easing, which indicated to me that their viewpoint is similar to the World Bank that 2009 is not going to be a very good year, to say the least," said Andrew Busch, global FX strategist at BMO Capital Markets in Chicago.

EURO, SWISS FRANC

The euro traded in a narrow range against the dollar, but held below a two-week high hit on Wednesday as the market digested the impact of the European Central Bank's massive injection of one-year funds into money markets.

The ECB poured 442 billion euros of one-year funds into money markets on Wednesday with a record 1,121 banks taking up the offer.

Earlier, the euro jumped to 1.5380 Swiss francs from around 1.5282 francs in a matter of a few minutes, while the dollar hit a session high of around 1.1020 francs from 1.0939 francs. The euro was last at 1.5297 francs, while the dollar bought 1.0970 francs.

Market participants remained jittery about possible intervention by the Swiss National Bank to weaken its domestic currency. The SNB repeatedly intervened on Wednesday, according to traders, giving a stark reminder that it is determined to fight deflation risks by preventing a rise in the Swiss franc.

"In the wake of yesterday, people were always going to be nervous, and we're in thinner summer markets and that always leaves potential for rumors or nerves to afflict markets," said Jeremy Stretch, strategist at Rabobank in London.

In other trading, sterling fell on caution about Britain's economic outlook.

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