By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar pared most of its losses against the euro on Thursday, after touching a five-month low, after a trio of better-then-forecast U.S. data reduced worries that the Federal Reserve will have to soon restart the printing presses.
The euro had gained earlier after a downgrade of Spain and a report on Ireland’s bailout costs removed some uncertainty regarding sovereign debt problems in Europe.
The dollar index (DXY 78.62, -0.07, -0.09%) , a measure of the greenback against a basket of six major currencies, pared gains but remained lower, for a fifth day, as 78.682, compared to 78.768 late Wednesday.
It fell as low as 78.414 earlier, the lowest level on closing basis since late January, according to FactSet.
The euro (EURUSD 1.3652, +0.0026, +0.1909%) bought $1.3641, up slightly from $1.3632 in late North American trading Wednesday.
It rose to $1.3683 intraday, the highest level since April.
The Chicago PMI climbed in September to 60.4%, according to reports, a big jump from 56.7% in August. Economists polled by MarketWatch had expected a drop to 55.0%.
The dollar pared some losses after a pair of reports showed first-time U.S. jobless claims declined more than forecast in the latest week and the U.S. economy grew at a slightly stronger pace in the second quarter than the government’ previously estimated. Read about U.S. jobless claims.
The U.S. currency has come under pressure since the Federal Reserve began hinting last week that it could resume buying U.S. bonds if the economy needed the extra support from even lower interest rates.
A central bank buying its own country’s debt is often known as quantitative easing, leading analysts to dub the potential new efforts QE2.
If top-tier U.S. economic reports -- like the ISM data on Friday and nonfarm payrolls next week -- corroborate the strength in the day’s numbers, that “could start to challenge the view that QE2 is a done deal,” said Alan Ruskin, global head of G10 FX strategy at Deutsche Bank.
Spain, Ireland
The single currency initially dipped after Moody’s Investors Service delivered a long-awaited downgrade to Spain’s sovereign credit rating but said the outlook on the new Aa1 rating was stable. Read about Spain’s downgrade.
“Ratings don’t matter, it is the outlook that matters,” which is why Spanish bonds rallied, said Andrew Brenner, head of emerging markets at Guggenheim Securities.
Also, Ireland’s central bank raised its estimate of the cost of recapitalizing the nation’s banking sector. See story about Irish bank rescue.
