NEW YORK (Dow Jones)--The euro's forward march stalled Thursday as choppy U.S. stocks caused the common currency to bounce up and down against the dollar before exiting the New York session little changed from day-earlier levels.In overnight trading, the euro had continued its two-week tear against the dollar, rising to a fresh 12-month high of $1.4768, but couldn't sustain those gains in erratic North American trading.
The euro had been climbing against the dollar as improving economic data and rising equities fueled optimistic risk trades. When economic data brightens and stocks rise, investors funnel funds into the euro, the Australian dollar and other high-yielding currencies.
But when data is discouraging and stocks fall, investors seek shelter in the safe-haven dollar.
Investors might have taken the pause in the euro's recent rally to take profits on the common currency's recent gains, a move that would lend temporary support to the dollar, said Vassili Serebriakov, foreign exchange strategist at Wells Fargo in New York.
The dollar advanced against the euro for part of the New York session, but the euro zone's common currency made a modest comeback in the afternoon. Trading was confined to a narrow range.
"We're still in a dollar-bearish environment, so any pullbacks are relatively shallow," Serebriakov said.
U.S. economic data released Thursday mostly met analysts' expectations, but showed a continuing slow recovery in the housing market, leading to a split market reaction, analysts said.
The better-than-expected Philadelphia Fed Manufacturing Survey business index jumped to 14.0 in September, its highest level since June 2007, and up from 4.2 in August.
Beneath the survey, though, lurked a worsening employment number, which could have led to some of the dollar's resilience in Thursday's session, said Brian Dolan, chief currency strategist at Forex.com in New Jersey.
Traders are "eyeing the 10,000 level" on the Dow Jones Industrial Average, said Kathy Lien, chief strategist at Global Forex Trading in New York. However, the Dow Jones Industrial Average ended slightly lower on the day.
"Should equities continue to rally, it will be hard to argue against further dollar selling," said Scotia Capital's Sacha Tihanyi.
Thursday afternoon in New York, the euro was at $1.4737 from $1.4729 late Wednesday, according to EBS via CQG. The dollar was at Y91.17 from Y90.78. The euro was at Y134.38 from Y133.72. The U.K. pound was at $1.6440 from $1.6506, while the dollar was at CHF1.0285 from CHF1.0306.
The Australian dollar advanced to its highest level since August 2008, $0.8775, before paring some of its gains. The Canadian dollar also rallied and the U.S. unit fell to as low as C$1.0608, its lowest level since last October.
Elsewhere, yen support continued from Japanese officials overnight Thursday, calming concerns that the new government might be tempted to curb yen strength through market intervention.
The yen got a lift on remarks by Bank of Japan Governor Masaaki Shirakawa suggesting he thinks a stronger domestic currency may benefit Japan's economy in the long term.
Earlier Thursday in Tokyo, new Japanese Finance Minister Hirohisa Fujii had said that he still sees no need to intervene in currency markets to weaken the yen.
"There's no change in my thinking" that it's not the time to consider foreign-exchange intervention, Fujii said at a news conference. Fujii had added that "the idea that the yen should be cheaper for the sake of (Japan's) exporters is wrong."
Elsewhere Thursday, the outcome of the meeting of the Swiss National Bank had only a fleeting effect on the dollar. The central bank said it will continue to intervene in currency markets to weaken the Swiss franc. A strong franc is rendering imports cheaper, which is increasing the risk of deflation, or a prolonged period of falling prices.
The U.K. pound weakened on comments from Prime Minister Gordon Brown at a summit of European Union leaders Thursday. He said countries should "continue and cement" their fiscal stimulus packages. The pound had alerady been under pressure after comments from a Bank of England governor earlier in the week supported continued low interest rates
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