Dollar Drops as Decrease in Jobless Claims Spurs Risk Demand

 The dollar declined against the euro as U.S. initial claims for unemployment benefits unexpectedly decreased last week, encouraging investors to buy higher-yielding assets at the expense of the greenback.

Sterling weakened beyond 91 pence per euro for the first time since April as a newspaper reported that Bank of England Governor Mervyn King said the pound’s drop is “very helpful” to the process of rebalancing the U.K. economy. Australia’s currency advanced toward a 13-month high against the U.S. dollar on the resilience of the nation’s banks.

“The implication is for a weaker dollar,” said Daniel Katzive, a senior currency strategist at Credit Suisse Group AG in New York. “If data supports risk appetite, funds will flow out to chase higher-yielding assets.”

The dollar slid 0.4 percent to $1.4796 per euro at 8:49 a.m. in New York, from $1.4735 yesterday, when it declined to $1.4844, its weakest level since Sept. 22, 2008. The dollar decreased 0.7 percent to 90.66 yen, from 91.29. The yen advanced 0.3 percent to 134.12 per euro, from 134.52.

U.S. initial jobless claims fell to 530,000 for the week ended Sept. 19, from a revised 551,000 the week before, the Labor Department reported today. The median forecast of 44 economists surveyed by Bloomberg News was for an increase to 550,000 from a previously reported 545,000.

The pound dropped as much as 1.3 percent to 91.37 pence per euro, the weakest level since April 3, on King’s comment on the currency reported in the Newcastle Journal. Sterling slid as much as 1.1 percent to $1.6170.

King also told the newspaper that policy makers have stabilized a “very sharp fall” in gross domestic product and prevented a “very, very nasty outcome.”