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Risk-on trade pulls dollar higher

The dollar rallied on Thursday as investors plowed cash back into riskier asset classes, with an underpinning of promising data from the United States and better-than-expected manufacturing data in Europe and China.

The dollar was up against a basket of major currencies, trading around 85.8. It benefited from both rising U.S. Treasury yields, which illustrated an easing of investor concerns after last week's phalanx of selling, and a continuing U.S. equities rally.

On the data front, the Conference Board's U.S. Leading Economic Index increased 0.8 percent in September after being flat in August, pointing to solid economic growth for the remainder of the year. New claims for U.S. unemployment benefits rose last week, but the underlying trend remained consistent with a firming labor market, data showed on Thursday.

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Benchmark 10-year U.S. Treasury yields rose to 2.27 percent as investors sold out of the safe-haven asset.

The dollar rose above 108 yen. The euro climbed near 137 yen

The euro pulled up from a two-week low against the dollar earlier on Thursday, helped by the pick-up in eurozone business growth, but traded near the unchanged mark above $1.26.

Gains for the euro could be fleeting amid continued expectations of more monetary easing and concerns over the health of the European banking sector.

An improvement in purchasing managers' surveys in Europe and China eases some worries about the outlook for those two key economies. Still, news that companies in the eurozone cut prices at the steepest rate in almost five years will be of concern to the European Central Bank, which is striving to ward off the risk of deflation in the region.

The New Zealand dollar fell around $0.78 after softer-than expected inflation data that could give the Reserve Bank of New Zealand room to further delay its next interest rate hike.

—By Reuters

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