* Spanish yields rise, weigh on euro
* US jobless claims fall to lowest in more than 5 years
* BoE keeps rates steady, supports sterling
By Julie Haviv
NEW YORK, May 9 The dollar catapulted to its
highest level against the yen in over four years on Thursday as
an upbeat U.S. jobless claims report suggested a stabilizing
labor market in the world's largest economy.
The dollar, up a whopping 16 percent against the Japanese
currency so far this year, started climbing earlier in the North
American session after data showed initial claims for state
unemployment benefits fell to its lowest level since January
Dollar gains accelerated in the early afternoon as options
barriers strongly defended over the past month were taken out.
Currency investors also chose to fund purchases of emerging
market currencies by selling the yen, a trader said.
"Defense of the 100-yen barrier was weak this time around,
so traders took advantage and zoomed ahead," said Sebastien
Galy, currency strategist at Societe Generale in New York.
"We see further upside in dollar/yen now that that barrier
is gone," he said.
The dollar rallied to 100.66 yen, its highest since April
2009. It last traded at 100.58 yen, up 1.6 percent on the
day and its biggest one-day gain in a month, according to
The state of the U.S. jobs market is a key factor for the
Federal Reserve. The central bank may opt to taper its $85
billion a month in bond purchases should the labor market show
sustained and broad improvement.
The Bank of Japan, on the other hand, last month announced
plans to buy $1.4 trillion in bonds to buoy its deflation-prone
The euro, meanwhile, faltered against the dollar after two
days of gains, pressured partly by a weaker-than-expected
Spanish debt auction, which served as a reminder to investors
that the outlook for the euro zone's weaker nations remained
But it was U.S. economic data that caught the market's
attention earlier in the session, especially as it came on the
heels of a robust U.S. non-farm payrolls report last Friday,
"The report reinforced expectations that the U.S. economy
remains best placed to begin gaining traction in its recovery
efforts compared to counterparts (in the developed world)," said
Samarjit Shankar, director of market strategy, at BNY Mellon in
He cited dollar buying over the last five days that was
almost twice as strong as the average greenback inflows seen
over the past year.
Kathy Lien, managing director at BK Asset Management in New
York, said the jobless claims report will keep discussions alive
about winding down asset purchases by the Federal Reserve.
"That should help the dollar at a time when other major
central banks are actively weakening their currency through
lower interest rates or currency intervention," she said.
The euro fell to a session low of $1.3057, failing to
build on gains made after robust industrial data from Germany
this week. It was last at $1.3058, down 0.7 percent on the day.
Against the yen, the euro last traded 0.8 percent higher at
"Not aiding the euro was a softer-than-expected Spanish
issue. Dealers ended up owning quite a bit of it, which
suggested that there was weaker demand," said Dean Popplewell,
chief currency strategist at OANDA in Toronto.
"That has prompted the euro to back away from its highs."
Spain's borrowing costs also rose on Thursday to 4.19
percent on speculation the country was planning a syndicated
deal in the near future, suggesting there would be a lot of
supply in a short period of time. Spanish yields have
risen in four of the last five sessions.
Investors also looked to book profits in Europe's shared
currency after it rose for two straight days. Market
participants were unwilling to hold euros for a longer period
given the threat of more monetary easing from the European
Central Bank, a move that should further erode yields on bonds
issued by euro zone sovereigns.
Bundesbank chief Jens Weidmann on Thursday said the ECB is
still able to take policy action to address the euro zone crisis
even after cutting its main interest rate last week, a German
newspaper reported. This follows remarks from ECB policymakers
Yves Mersch and Joerg Asmussen, who said on Wednesday the
central bank still had room to maneuver on interest rates should
the euro zone economy continue to weaken.
The ECB cut its main rate to 0.5 percent last Thursday.
While German industrial data this week beat expectations,
overall economic activity across most of the euro zone remains
sluggish, keeping alive expectations the ECB may act again soon.