The US dollar was down modestly in New York trading on Thursday, continuing to follow its trend lower as it adjusts to the structural challenges posed by the US current account deficit.
With the US presidential election now decided in favor of President George W. Bush, the currency market has resumed the move toward a lower dollar in earnest.
Major currencies managed to advance against the dollar even in the face of data showing a larger-than-expected drop in jobless claims in the latest week as well as a sharp US$2.06 drop in the price of oil to US$48.82, it's lowest level in more than a month.
The trend suggests that investors are "becoming more confident that arguments for structural dollar weakness can outweigh good news on the cyclical front," Daniel Katzive, foreign exchange strategist at UBS, said in a research note.
In trading on Thursday, the exception to the trend was the pound, which fell versus the dollar in a reaction to a report from mortgage lender Halifax, which said that UK home prices dipped 1.1 percent last month versus September.
In late trading, the euro was at US$1.2869, compared with US$1.2820 late Wednesday. The dollar was at ?105.99 from ?106.21, and at 1.1873 Swiss francs from SF1.1933. The British pound was at US$1.8435 from US$1.8487.
With the dollar pushing ever lower, traders now have their eyes on the key euro level of US$1.2900, which is just short of the euro's all-time high of US$1.2925 reached last February.
On Thursday, the euro flirted with that level but failed to move above US$1.2897. Whether or not it will be able to cross the level in the short term will largely depend on how economic fundamentals play out.
"In the short term, the dollar is likely to be driven by data, especially by the October labor market report, September trade balance, and the [Federal Reserve policy] meeting," strategists at Morgan Stanley said in a research note.
The median estimate of economists surveyed by Dow Jones Newswires is for a 192,000 increase in payrolls, which would be the largest gain since a 208,000 rise in May. They look for the jobless rate to hold at 5.4 percent. Though an on-consensus report would likely cause at least a brief correction in the dollar, it would not be seen as particularly strong, since it falls below the employment growth trend seen in the first half of the year.
A report significantly below the consensus could help to increase the ranks of economists who do not expect the Fed to continue raising interest rates.
That could, in turn, put renewed selling pressure on the dollar, since the reduced prospect for higher rates would turn some international investors to looking elsewhere for higher rates of return.
The Fed is widely expected to raise rates when it meets next week, but any rate hikes beyond that are being questioned due largely to sluggish job growth and concerns that high oil prices are going to drag on overall economic growth.
A strong report would, conversely, throw at least a temporary wrench in the dollar's grind lower, and could lead to a period of range trading roughly between US$1.2500 and US$1.2900, Katzive said.
In addition to the dollar's ongoing slide, the euro was helped versus the dollar on Thursday following a meeting of European Central Bank (ECB) policymakers. Though the ECB left interest rates unchanged and identified some economic challenges, it largely stuck to its upbeat outlook for a growing euro-zone economy next year.