NEW YORK (MarketWatch) -- High-yielding currencies like the Australian dollar and the British pound came under pressure Thursday as investors fretted about declining stock markets and an unraveling world economy.
Sterling dropped 0.6% to $1.4865, and the Australian dollar lost 1.3% to 62.80 cents.
The U.S. dollar bought the most Swiss francs since July 2007 after the Swiss National Bank surprised markets with a steep, one-percentage point rate cut, noting fading price pressures and a deteriorating world economy. See full story.
The Swiss franc traded at $1.2196 francs, down about 0.6% from late Wednesday.
"This move confirms a highly pro-active and aggressive central banking community and there will be more to come" from the Bank of England and European Central Bank, said Audrey Childe-Freeman, senior currency strategist at Brown Brothers Harriman.
International stock markets saw heavy pressure Thursday after Citigroup's big stock price drop on Wednesday as well as the FOMC minutes which lowered the U.S. central bank's outlook on GDP and raised forecasts for unemployment. See Europe Markets.
"Currency markets were more subdued but markets are clearly holding closely to safe havens," said currency analysts at UBS.
The sterling drop even came as U.K. retail sales slipped by a less-than-forecast 0.1% in October.
"Overall, the retail numbers were better than expected -- but still show stagnation in underlying growth prospects as consumers suffer from the decline in credit availability, the squeeze on real disposable incomes and worries about unemployment," said Charles Davis, an economist at the Center for Economics and Business Research.
Davis expects the Bank of England to follow November's 1.5 percentage point rate cut with another half-point cut, which would take U.K. rates down to 2.5%.
Other major currencies held onto gains against the U.S. dollar after the Labor Department said initial claims for jobless benefits rose to 542,000 in the latest week, the highest since 1992.
The euro rose to $1.2515 from $1.2496 late Wednesday. The dollar slipped 0.7% to 95.11 yen.
The dollar index , a measure of the greenback against a trade-weighted basket of six major currencies, was little changed at 87.791.
Also in the U.S., leading indicators for October and a Philadelphia-area manufacturing gauge for November also are due for release.
