Dollar gains on weak euro-zone data, Japan remarks

Traders in the Eurodollar options pit at the Chicago Board of Trade signal orders, shortly after the Federal Reserve's decision to leave short-term interest rates untouched between zero and 0.25 percent, in Chicago December 16, 2009.

NEW YORK (Reuters) - The U.S. dollar rose against the euro and yen on Thursday, underpinned by weak German and euro-zone data as well as by comments from Japan's new finance minister that he wanted the yen to weaken more.

The dollar's gains pushed the currency to four-month highs versus the yen. The greenback was also on track for its best one-day gain against the euro in nearly three weeks.

A better-than-expected U.S. initial jobless claims report also supported the dollar and added to the view that the economy continues to improve after being mired in a deep recession.

"We had weak euro-zone data hurting the euro against the dollar and earlier in the session, we had the Japanese finance minister saying he favors a weak yen. That kicked off buying in the dollar," said Masafumi Takada, director of foreign exchange at BNP Paribas in New York.

Speaking after his appointment as finance minister, Naoto Kan said many Japanese firms were in favor of dollar/yen around 95 yen, higher than the pair traded in late 2009.

In midday New York trading, the dollar rose 0.9 percent to 93.13 yen, after earlier climbing to 93.40, its strongest since September, according to Reuters data.

Andrew Wilkinson, senior market analyst, at Interactive Brokers in Greenwich, Connecticut, said it would be interesting to see how Kan deals with the yen if it strengthens in the weeks ahead.

"Investors will be eagerly watching ... whether he will ask the Bank of Japan to help, something that hasn't happened in six years."

Broad dollar strength saw it rise against a basket of currencies. The ICE Futures' dollar index .DXY gained 0.6 percent to 77.9201.

The euro fell 0.6 percent to $1.4323, on track for its worst day since December 17, according to Reuters data. Its low for the day was $1.4299. The single currency was hurt by weak German manufacturing orders and euro-zone retail sales data.

In contrast, the U.S. economy continues to look better, with initial jobless claims at 434,000 in the latest week, compared with expectations for 447,000.

"There are clearly still a lot of seasonal factors at play in these numbers," said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington. "Nevertheless, the larger-than-expected drop in both the headline and four-week moving average and even continued claims should be consistent with continued recovery in labor markets."

Traders are now awaiting Friday's payrolls report for December, which could help shape the outlook for U.S. interest rates. The report is expected to show the economy shed 8,000 jobs in December, after a surprisingly small drop of 11,000 in November, a Reuters poll showed.

But some analysts are now looking at a minor jobs gain, which would lend support to the dollar as well.

On Wednesday, the U.S. currency lost ground against the euro when minutes from the Federal Reserve's latest policy meeting suggested more economic stimulus measures were possible.

Some analysts said Fed officials may have a darker view of the economy than some recent economic data suggests.

(Additional reporting by Nick Olivari; Editing by Jan Paschal)