The U.S. dollar gained against most other major currencies Thursday, while the Swiss franc fell sharply after Switzerland's central bank said it will take action to stop the appreciation of the franc against the euro.
The dollar index which measures the greenback against a trade-weighted basket of six global currencies, stood at 88.10, up from 87.719 in late North American trading Wednesday.
On Wall Street, U.S. stocks declined Thursday, boosting safe-haven demand for the greenback. The Dow Jones Industrial Average dropped 25 points, or 0.4%, to 6,899.
The Swiss franc tumbled after the Swiss National Bank said it would buy foreign currencies in an effort to halt the currency's rise versus the euro.
The euro jumped 3% against the Swiss currency in recent action, while the U.S. dollar rose 3.5% against the franc.
In a statement following its regular policy meeting, the SNB said the franc has risen substantially since the beginning of the financial crisis in August.
"In view of this development, the SNB has decided to purchase foreign currency on the foreign exchange market, to prevent any further appreciation of the Swiss franc against the euro," the SNB said in a statement.
The SNB also lowered the target range for the three-month Libor by 25 basis points, narrowing it to 0-0.75%.
Dollar pares losses vs. yen
The U.S. dollar pared some of its earlier losses against the Japanese yen after better-than-expected U.S. retail sales data.
Retail sales dropped 0.1% on a seasonally adjusted basis in February, the Commerce Department reported Thursday. That was better than the 0.4% decline expected by economists surveyed by MarketWatch.
However, there was more gloomy news about the U.S. labor market.
The number of workers filing initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 654,000 last week, the Labor Department reported Thursday.
The dollar was last down 0.2% to 97.22 Japanese yen after earlier hitting an intraday low of 95.65.
The Japanese yen registered across-the-board gains Thursday, rising as worries about that nation's economy and the global outlook undercut a short-lived rally in equity markets.
The dollar, which had appeared to take over from the yen earlier this year as the world's ultimate safe-haven currency, moved mostly higher but lost ground against the Japanese unit.
"This inevitably raises the question whether we are seeing a return of the yen as a refuge currency, and the correlation with equity markets which seemed to have broken down in January," they wrote in a research note.
Revised data released Thursday showed the Japanese economy shrank 3.2% in the final three months of 2008 -- leaving gross domestic product fully 12.1% below the level seen in the final quarter of 2007.
Preliminary estimates had indicated a 3.3% sequential decline and a 12.7% year-on-year contraction. Still, the upward revision underscored that the world's No. 2 economy is mired in a severe recession, economists said.
