Dollar falls in volatile trade after mixed signals from data

The dollar fell broadly on Thursday after reversing earlier gains that sent it up against the euro and yen amid a cross-current of economic data that muddied the view on when the U.S. Federal Reserve will start trimming its stimulus measures. A sharp drop in initial U.S. weekly jobless claims and an inflation figure for July in line with expectations supported views that the Fed will begin shifting its policy stance soon, driving the dollar higher.

But the dollar surrendered gains against the yen after data showed factory activity in the U.S. mid-Atlantic region weakened in August as new orders fell and the pace of hiring slowed.

"As a result of today's initial jobless claims number, the Street is going to be marking up the expectations of a positive non-farm payrolls report in September," said Michael Woolfolk, global market strategist at BNY Mellon in New York. "So that could seal the deal really on a September taper. That is of course being viewed as negative for bonds," and therefore negative for the dollar on a flow of funds basis.

The euro rebounded to trade at $1.3348, up 0.70 percent. Against the yen, the greenback hovered around 97.22 yen, down 0.93 percent. At its weakest point of the day the dollar was down more than 1 percent against the Japanese currency at 97.09.

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