Dollar soars vs. yen on recovery hopes

NEW YORK (MarketWatch) -- The U.S. dollar surged against the Japanese yen and other major currencies on Thursday after data showed a decline in jobless claims, signaling that the worst of the American recession may be over.
The government reported that initial jobless claims fell 14,000 to 631,000 during the week ended April 25.
A moderation in claims could mean that the pace of deterioration in the labor market is slowing, even though that market is still weak.
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DXY 84.56, -0.05, -0.1%) , a measure of the greenback against a trade-weighted basket of six major currencies, rose to 84.764, up from 84.573 in North American trade late Wednesday.
The greenback rose 1% against the Japanese currency to 98.55 yen.
The yen, typically seen as a safe haven, was hurt by investors' willingness to buy riskier assets. The dollar is also traditionally a safe-haven currency.
"The dollar's safe-haven status is playing second fiddle to the market's demand for the greenback" today, said Kathy Lien, director of currency research at GFT.
The prior weakness of the U.S. dollar was primarily due to month-end fixings, and because it is the last trading day of April, dollar negative fixing flows have come to an end, Lien said.
"Currency traders are also relieved that the bleeding in jobless claims is slowing," she said.
On Wall Street, U.S. stocks finished mostly lower Thursday after the Obama administration announced that Chrysler LLC will finally be tossed into bankruptcy to ease the crushing debt burden on the car maker. But they finished solidly higher for the month. Read more.
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DJIA, , ) fell 0.2% to 8,168, while the S&P 500 ($SPX:
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$SPX 872.81, -0.83, -0.1%) lost 0.1%. But the benchmarks ended solidly higher for the month.
Separately, the World Health Organization decided to raise its alert level over swine flu to five on its six-point scale, indicating that the probability of a pandemic is high. See full story.
"The market enjoyed an improvement in risk appetite, which weighed on the Japanese yen, although some of the selling was tempered, with swine flu still a background influence," said analysts at Action Economics.
"Yesterday's more optimistic FOMC statement should keep risk appetite in vogue," they said.
Some of the increased confidence stems from the statement issued by the Federal Reserve's policy-making Federal Open Market Committee Wednesday. The FOMC said the economic outlook had "improved modestly" and announced no changes in its plan to buy Treasurys or other securities as part of its massive effort to keep credit flowing to the economy.
While the statement was far from a glowing endorsement of the economy's prospects, currency markets tend to react more to perceived "inflection points" in the global economy rather than "confirmation of news itself," wrote strategists at Standard Chartered Bank.
"Markets may need much more concrete signs of bad news in the near term to outweigh the quiet confidence that the Fed has expressed," they said, in a research note.
"Risky currencies may well catch a bid in the coming days, to the detriment of 'safe-haven' currencies such as the U.S. dollar and the Japanese yen."
As expected, the Bank of Japan on Thursday left official interest rates unchanged and reduced its expectations for economic growth in fiscal year 2009 as exports continued to suffer from the weak global economy. The central bank also said it expects overseas economies to start recovering in the latter half of the fiscal year. See full story.
Euro falls
In volatile trading, the euro fell 0.2% to $1.3224. Earlier, the currency fell to an intraday low of $1.3190.
Unemployment in the euro zone rose to 8.9% in March, slightly higher than in February, the statistics agency Eurostat said.
Eurostat also estimated that annual inflation in April continued at a record-low pace of 0.6% in April, unchanged from the previous month and well below the ECB's target of near but just below 2%.
The British pound was flat at $1.4783.
The typical British house price declined by a seasonally-adjusted 0.4% in April, according to Nationwide's monthly survey Thursday, after posting a 0.9% monthly increase in March. See full story.
British consumer confidence posted its third monthly rise in April, continuing a slow rebound from an all-time low notched last summer, market research firm GfK NOP reported Thursday. See full story.
The New Zealand dollar fell after the nation's central bank cut its official cash rate by a half point to a record low of 2.5% and said it expects the rate to remain at or below the current level until late 2010. See full story.
The New Zealand dollar fell 1.4% to 56 cents for every one U.S. dollar. End of Story
Polya Lesova is a New York-based reporter for MarketWatch.
William L. Watts is a reporter for MarketWatch in London.