By Polya Lesova & William L. Watts, MarketWatch
NEW YORK (MarketWatch) -- The U.S. dollar fell sharply against other major currencies Thursday, as a surge in jobless claims and other negative economic data put the greenback under heavy selling pressure.
The dollar index , a measure of the greenback against a trade-weighted basket of six currencies, slipped 0.9% to 83.95 from 85.480 in North American activity late Wednesday.
"The U.S. dollar is tanking as jobless claims rise by the largest amount since November 1982, 26 years ago," said Kathy Lien, director of currency research at GFT. "As we have suspected, it is the 1980s all over again."
The Labor Department reported Thursday that the number of first-time filings for state unemployment benefits jumped by 58,000 to a 26-year high of 573,000 last week. Read more.
Separately, the Labor Department said that the prices of goods and services imported into the United States fell a record 6.7% in November. See full story.
In other news, the Commerce Department said that the nation's trade deficit widened 1.1% to $57.2 billion from $56.6 billion in September. Economists had expected the deficit to narrow to $54.5 billion. See Economic Report.
The euro rose 2% to $1.3279 and the British pound jumped 1.1% to $1.4960.
The dollar fell 1.1% versus the Japanese yen, dropping to 91.70 yen from 92.59 yen late Wednesday. Earlier Thursday, the dollar hit an intraday low of 91.15 yen.
"The last four trading days are witnessing a gradual retreat in the U.S. dollar, which is extending across dollar/yen," said Ashraf Laidi, chief market strategist at CMC Markets.
"With potentially market-punishing economic reports mainly out of the way for the year, the main focus remains on Capitol Hill's final package for U.S. automakers," Laidi said.
The U.S. House of Representatives approved a $14 billion federal loan package for the struggling Big Three automakers on a 231-170 vote late Wednesday, overcoming opposition of some Republicans but sending the bill to an uncertain fate in the Senate.
Republicans in the House and the Senate said throughout the day that a bailout for the Big Three wouldn't lead them to long-term viability or competitiveness. See full story.
Gaining from dollar weakness, gold futures rose more than 2% and oil futures rallied 8%. See Metals Stocks. See Futures Movers.
Pound tumbles vs. euro
The British pound was unable to maintain a rebound versus the euro Thursday, notching yet another record low against the European single currency on concerns the United Kingdom will be especially hard hit by the global economic downturn.
The euro pulled back in early action after setting a record high versus sterling near 88.20 pence late Wednesday. But the euro soon returned to the plus side, and was last seen near 88.64 pence after trading as high as 88.95 pence, according to FactSet.
Recent weakness has prompted talk the pound could trade at parity to the euro.
Kenneth Broux, an economist at Lloyds TSB, said such a move is unlikely. The pound has reached significantly oversold technical levels versus the euro and is likely to see a near-term bounce back toward 85 pence, he said.
Over the longer term, however, aggressive stimulus measures by the British government and expectations the Bank of England will cut interest rates next year to their lowest level in its 300-year-plus history could keep pressure on sterling, he said.
