The dollar fell sharply versus the euro on Thursday, as concerns about lingering weakness in the U.S. housing sector outweighed Europe’s growing sovereign debt crisis.
Traders are focused on the interest rate gap between the U.S. and Euro area, which is expected to widen next month with a rate hike from the European Central.
Barring an significant escalation of Europe’s sovereign debt problems, the buck is expected to remain weak until the Federal Reserve takes a the possibility of a third tranche of quantitative easing off the table.
The dollar dropped to $1.4220 against the euro, edging near this week’s 4-month low of $1.4247.
The Portuguese government collapsed yesterday when opposition lawmakers rejected sweeping austerity measures.
European Union officials gathered in Brussels for a two-day meeting to address the region’s sovereign debt problems.
While few details have emerged, the markets are expressing confidence that Euro area powerhouse Germany will stand with its debt-ridden neighbors.
While, the dollar was pressured by the euro, it held its ground versus the sterling and yen.
The dollar improved to $1.61 versus the sterling, staying away from this week’s yearly low of $1.64.
There was virtually no movement for the dollar against the yen for a fifth day. The pair is locked in one of the tightest trading ranges in memory, holding just below Y81.
Last week, the dollar hit a record low of Y76.30 before the G7 intervened on behalf of Japan to weaken the yen.
In economic news from the U.S., the Labor Department released a report on Thursday showing a modest decrease in first-time claims for unemployment benefits in the week ended March 19th, with claims remaining below the key 400,000 level.
The report showed that initial jobless claims fell by 5,000 to 382,000 from the previous week’s revised figure of 387,000.
However, orders for U.S. durable goods unexpectedly showed a notable decrease in the month of February, according to a report released by the Commerce Department on Thursday.