Currencies

Dollar gains for second day, shrugs off record US jobless claims

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Yen, euro and U.S. dollar banknotes of various denominations.
Kiyoshi Ota | Bloomberg | Getty Images

The dollar rose for a second straight day against a basket of currencies on Thursday as investors, worried about the prospect of a global recession, continued to take shelter in the greenback.

"With the increase in the coronavirus impact around the world, investors are looking at the dollar as a safe haven," said Chris Gaffney, president of World Markets, TIAA Bank in St. Louis, Missouri.

U.S. jobless claims in the latest week soared to a record level, yet the dollar's reaction was tepid at most.

Data showed initial claims for unemployment benefits rose to 6.65 million in the latest week from an unrevised 3.3 million the previous week. The figures far exceeded the median estimate of 3.50 million in a Reuters survey of economists.

"The order of magnitude of this data is so colossal compared to expectations that there's really no datum to work out what the story is," said Richard Benson, co-chief investment officer at Millennium Global Investments in London.

"It's just very, very bad. So I am not sure the market is going to trade on data surprises from that mix."

Markets have been alarmed since U.S. President Donald Trump's warning on Tuesday of a painful two weeks ahead in fighting the coronavirus, even with strict social distancing measures.

The United States has over 200,000 confirmed COVID-19 cases - the most worldwide - which has sent investors flocking to safe-haven assets.

Some analysts do not expect the dollar to extend its recent rally after the Federal Reserve took a series of measures, which have begun to have an impact, to ensure an adequate global supply of the currency.

The cost of raising U.S. dollar funds in the yen and euro swaps market stabilized on Thursday, with premiums favoring the other currencies, suggesting that greenback demand had receded from earlier in the coronavirus pandemic. 

In early afternoon trading, the dollar index was up 0.8% at 100.35 .

Against the yen, the dollar rose 0.7% at 107.91 yen .

The euro extended its decline, falling 1.2% to $1.0828, after hitting a one-week low .

The Fed's efforts to improve dollar liquidity have boosted other currencies such as the Norwegian crown, which advanced further on Thursday to a three-week high of 11.1820 against the euro. It was last trading up 2% at 11.24 .

To combat the economic slowdown from the pandemic, the Fed said on Wednesday it was temporarily easing its leverage rules for large banks by exempting certain investments from a key leverage calculation.