Dollar extends drop against euro on global growth concerns

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The dollar slipped against a basket of major currencies such as the euro and Japanese yen on Thursday after worries about global growth led traders to sell riskier assets and favor lower-yielding currencies.

Concerns that China and other emerging markets could face more economic weakness led traders to sell the dollar and riskier assets such as U.S. stocks and buy back currencies such as the euro and yen, which are cheap to own since the European Central Bank and Bank of Japan are keeping rates low through stimulus measures.

That dynamic weakened the dollar, since the U.S. Federal Reserve's intent to tighten monetary policy by raising rates has made it less favorable as a funding currency, analysts said. Traders also looked ahead to a speech from Fed Chair Janet Yellen at 5 p.m. ET (2100 GMT).

The Fed, by not hiking rates and noting worries about the global economy last week, has exacerbated nervousness in the market, analysts said.

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"You have all these uncertainties, and on top of that, you had a Fed that had a chance to give you some certainty" but added to uncertainty, said Ihab Salib, head of international fixed income at Federated Investors in Pittsburgh, who is also responsible for currency management at the firm.

The dollar reversed gains against the Mexican peso and Brazilian real, meanwhile, after hitting record highs against the riskier emerging market currencies earlier in the session.

The rebound in the peso and real may have been a result of traders taking profits in the dollar's gains, said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

The dollar was last down 1.25 percent against the peso at 16.90 pesos after hitting a record high of 17.34 pesos, and was down 2.95 percent against the Brazilian real at 4.0541 reals after hitting a record high of 4.2482 reals.

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The dollar was up 2 percent against the Norwegian crown at 8.4503 crowns after hitting 8.4842 crowns, its highest since mid-2002, after Norway's central bank surprised markets by cutting rates.

The euro was last up 0.33 percent against the dollar at $1.12230. The dollar was last down 0.25 percent against the yen at 120.010 yen after hitting a nearly one-week low of 119.210 yen. The dollar was down 0.29 percent against the Swiss franc at 0.97690 franc.

The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.10 percent at 95.970.