Forex - Dollar higher vs. euro but trims gains against yen

The U.S. dollar extended gains against the euro on Thursday, following remarks by European Central Bank President Jean-Claude Trichet, but trimmed gains against the yen as a dollar rally sparked by Japan’s currency market intervention fizzled.

During U.S. morning trade, the greenback was sharply higher against the euro, with EUR/USD tumbling 1.27% to hit 1.4140.

Earlier in the day, ECB head Jean-Claude Trichet said the bank will conduct more cash operations to provide liquidity to banks over the next six months as the region’s debt crisis deepens.

The central bank kept its benchmark interest rate unchanged at 1.5% in a widely anticipated decision, with Trichet saying that rates are still “accommodative” and inflation risks “remain on the upside.” 

The greenback was also down against the pound, with GBP/USD shedding 0.64% to hit 1.6321.

Earlier in the day, the Bank of England said it was maintaining the benchmark interest rate at 0.50%, as expected.

Elsewhere, the greenback trimmed gains against the yen and dipped against the Swiss franc, withUSD/JPY up 2.35% to hit 78.86 and USD/CHF slipping 0.13% to hit 0.7692.

Earlier in the day, Japanese officials intervened in currency markets for the first time since March to curb the yen’s gains and support the country’s largely export-led economy, sending the yen sharply lower against all major currencies. 

The Japanese intervention came one day after the Swiss National Bank cut its key lending rate to a narrower range calling the Swiss franc “massively overvalued.”

In addition, the greenback was higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD rallying 1.19% to hit 0.9734, AUD/USD tumbling 1.63% to hit 1.0579 and NZD/USD dropping 1.25% to hit 0.8526.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, jumped 1.33% to hit 75.18.

Also Thursday, official data showed that the number of people who filed for unemployment assistance in the U.S. last week fell unexpectedly.

The Labor Department said the number of individuals filing for initial jobless benefits in the week ending July 29 fell by 1,000 to a seasonally adjusted 400,000, confounding expectations for an increase to 406,000.

Dollar Soars as Global Equities Tumble- Yen Heavy on MoF Intervention

The greenback advanced against all its major counter parts an hour into US trade as global equities continued to sell-off, with the Swiss franc topping the performance charts with a loss of just 0.19% against the dollar. The USD/CHF pair tested the 23.6% short-term Fibonacci extension taken from the July 31st and August 1st crests at the 0.78-handle, before finding solace around the 61.8% extension at 77.15. The swissie is likely to remain well supported however as remarks made by ECB President Jean-Claude Trichet saw European investors once again seeking refuge in the swissie. A downside break here sees interim support at the 76.4% extension at 76.80 backed by the 76.50 level and the 76-figure. Topside resistance holds at the 78-handle, with subsequent ceilings seen at 78.50, 79, and the 79.50 level. Overnight traders will be eyeing data out of Switzerland with July CPI data on tap. Inflation is expected to remain subdued with consensus estimates calling for a print of -0.6% m/m and 0.7% y/y, well below its European neighbors where the risk to inflation remains to the upside, as cited today by President Trichet.