NEW YORK (MarketWatch) � The dollar fell to a seven-week low against major currencies on Thursday, then recovered some as U.S. stocks extended losses following a slew of U.S. economic reports on jobless claims, durable-goods orders and new-home sales.
The move comes a day after the Federal Reserve said interest rates may remain at ultralow levels until late 2014, reducing the appeal of the greenback to international investors.
The ICE dollar index DXY , which measures the U.S. unit against a basket of six major currencies, fell to 79.416 from 79.563 late Wednesday in North America. It touched its lowest level on a closing basis since early December and is well below its 80.131 level ahead of the Fed�s policy announcement. See report on Wednesday�s currency moves.
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Channel Capital Research's Doug Roberts discusses how the Fed's announcement that it will likely keep rates near zero until late 2014 is likely to affect the financial markets going forward.
The euro EURUSD rose to $1.3107 from $1.3091 late Tuesday, after hitting its highest level of the new year.
The dollar initially extended losses after a pair of U.S. reports showed jobless claims rose to 377,000 in the latest week and durable-goods orders jumped 3% last month � both higher than economists expected. See full story on jobless claims . Read about durable goods.
`Sweet spot fo! r risk a ppetite�
�The big question is how much the markets care about data after the Fed yesterday,� said Alan Ruskin, global head of G-10 foreign-exchange strategy at Deutsche Bank.
�U.S. growth near trend with a dovish Fed is close to the sweet spot for global risk appetite. There is nothing in the latest data to change that view, although much like last year it is Europe that will ultimately dictate the extent of the follow-through on risk.�
Later, a report showed new home sales fell unexpectedly in December. Separately, the U.S. leading indicators index rose 0.4%, less than some had forecast. See more on new-home sales. Read about leading indicators.
Indeed, the euro began giving back some of its gains by afternoon trading as U.S. equity losses deepened. The Standard & Poor�s 500 Index SPX �lost 0.7%. Read about U.S. stocks.
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�The main reason why the euro failed to hold onto all of its earlier gains is because U.S. stocks retreated from their highs and the reason for that was because the second set of U.S. data was not nearly as good as the first,� said Kathy Lien, director of currency research for GFT.
�Investors realized that disappointing U.S. data is as bad for the rest of the world as it is for the U.S. economy and this explains why the dollar began to recover towards the end of the U.S. session,� she said.
The Fed�s move Wednesday and subsequent remarks by Federal Reserve Chairman Ben Bernanke served to spur risk appetite, lifting commodities and equities while the dollar weakened. Read about dollar after Fed comments.
�The Fed chairman may argue that the pledge is conditional, but references to remaining vigilant and being willing to take more action if needed certainly provided negative impetus for the U.S. dollar,� said Jeremy Stretch, currency strategist at CIBC.
�Risk appetite certainly took the presumption of seven years of low rates positively, benefitting the usual suspects, as the search f! or yield ramped up again.�
Also supporting the euro, Dow Jones Newswires reported that a story in Greek newspaper Ethnos said private creditors were willing to accept an average interest rate of less than 4% on new bonds to be issued as part of a voluntary debt swap, raising hopes for a deal.
�If true, the news would greatly ease tension in the euro-zone credit markets, which were becoming increasingly concerned that Greece would default on its obligations, triggering a credit event that could severely damage the region�s financial sector,� said Boris Schlossberg, director of currency research at GFT.
Japanese yen, Australian dollar
The Japanese yen gained ground, with the dollar USDJPY � changing hands at �77.48, down from �77.78.
Still, Credit Agricole strategists said that �bearish sentiment may (finally) be waning� and the dollar could soon break through the �78.30 level that marked the resistance level during the second half of last year.
Among other major currency pairs, the British pound GBPUSD rose to $1.5695 from $1.5645 late Wednesday.
The Australian dollar AUDUSD , often looked to as a gauge of risk appetite,�added to the prior day�s gains to buy $1.0621, up from $1.0595.
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