The U.S. dollar edged higher against a basket of major currencies on Thursday to notch its strongest monthly gain in over a year after U.S. labor market data fueled expectations for a more hawkish Federal Reserve.
The Labor Department said the Employment Cost Index, the broadest measure of labor costs—and one of Fed Chair Janet Yellen's favorite labor market gauges—rose 0.7 percent in the second quarter, marking the biggest increase in over 5-1/2 years.
U.S. weekly jobless claims, meanwhile, edged up to 302,000 in the latest week. While that was slightly above expectations, the four-week average of claims fell 3,500 to 297,250, their lowest since April 2006.
Currencies
The U.S. dollar index hit a fresh 10-1/2-month high above 81.57 after the data, but pared most of its gains on profit-taking ahead of Friday's U.S. nonfarm payrolls data, which economists expect to show U.S. employers added 233,000 jobs in July.
The euro last traded near $1.34, down almost 0.1 percent against the dollar and just above an eight-month trough. The dollar was up almost 0.1 percent against the above 102 yen, and up 0.01 percent against the Swiss franc below 0.91 franc.
Traders largely shrugged off data showing the pace of business activity in the U.S. Midwest in July sank to its slowest since June 2013. The Institute for Supply Management-Chicago business barometer tumbled to 52.6, below economists' expectations for a rise to 63.0.
The U.S. dollar index, which measures the dollar against a basket of six major currencies, was last up 0.03 percent above 81.45. The index posted its biggest monthly gain in nearly 1-1/2 years of over 2 percent in July.
The yield on the U.S. benchmark 10-year Treasury note inched up to 2.56 percent. On Wall Street, the benchmark S&P 500 index was on track for its worst day since April on concerns over the strength of overseas economies and ongoing tensions with Russia.
—By Reuters