The euro fell below $1.22 for the first time in two years, continuing its July slide, while the yen was broadly stronger after the Bank of Japan held off from expanding its asset-purchase program.
The euro has hit a string of two-year lows in recent days after the European Central Bank and other policy makers around the world cut interest rates last week in a sign of concerns about the state of the global economy. Poor Australian jobs data and an interest-rate cut by the Bank of Korea, both Thursday, fed those worries ahead of a stream of Chinese data on Friday.
In addition, minutes from the Federal Reserve, released Wednesday, cut interest rates on Thursday, indicated the Fed was in no immediate rush to launch another round of bond buying to stimulate the economy. The lowered expectations for easing gave the dollar a lift against most major currencies since such measures generally weaken the local currency.
The euro traded at $1.2189 in New York, showing little reaction to a steeper-than-expected drop in U.S. weekly jobless claims, down from $1.2239 late Wednesday in New York and $1.2661 at the end of June. The dollar was at ¥79.27 compared with ¥79.76, while the euro was at ¥96.62, down from ¥97.62. Meanwhile, the pound was trading at $1.5446, from $1.5503 late Wednesday in New York.
The euro's drift lower came in spite of a surprise rise in euro-zone industrial production data for May, which showed output climbing 0.6% on a monthly basis, compared with expectations for a 0.2% fall. However, the year-to-year drop was the biggest since December 2009, highlighting the weakness of the sector.
The euro also failed to get a boost from a sharp fall in Italian borrowing costs at a 12-month treasury bill auction.
"The markets have been fairly disappointed by central banks' timid policy response," said Ian Stannard, senior currency strategist at Morgan Stanley. "With many questions still surrounding the Greek situation and the German court's decision on the constitutionality of the European Stability Mechanism, we do not see room for the euro to make gains over the next several weeks."
The Australian dollar was the largest loser among the major currencies. After falling sharply on the Australian jobs data to below $1.02, the Aussie extended its losses in European trading to fall more than a cent on the day.
European emerging-market currencies held broadly steady, but some Asian currencies such as the Singapore dollar and South Korean won were under pressure after the Bank of Korea's surprise rate cut renewed investors' concerns about economies in the Asia Pacific region.
