Overall: The dollar weakened against most of the other major currencies on Thursday as U.S. equity markets staged an afternoon rally, closing higher, and oil prices crossing above $65 a barrel. Once again, we have seen traders willing to absorb more risk in return for possible higher gains and that led to the dollar being sold. The exceptions today were cable, which traded for most of the day to the downside on comments from David Blanchflower and the yen which gained after a report last night showed demand for overseas assets among Japanese investors is growing. The move higher intensified after the U.S. equity market turnaround.

U.S. durable goods orders rose1.9% in April but remains near the lowest levels since 1996. A rebound in automobile orders and a rise in defense spending led the gain in durable goods orders in April. Initial unemployment claims dropped last week, giving hope that firings may be slowing. Initial jobless claims fell by 13,000 to 623,000 last week from a revised 636,000 the previous week. The number of collecting unemployment insurance rose to a record for the 17th straight week.

The Euro (Eur/Usd) The euro rebounded from Wednesday’s sharp drop on Thursday, gaining 125 pips and closing near 1.3950. The move higher came as U.S. equity markets closed higher boosting trader demand for higher yielding assets. The German economy lost only 1K jobs in April, much lower than what had been expected, while euro-zone consumer confidence held steady at -31.
The Pound (Gbp/Usd) Cable traded in a wide 165 pip range on Thursday, closing just slightly lower than the Asian session opening price. The pound traded under pressure after Bank of England policy maker David Blanchflower said there may be “many false dawns” for the nation’s economy. He also said he sees very little for a strong 2010. However, cable rebounded as the dollar weakened in the broad market.

The Aussie (Aud/Usd) Higher equity markets and higher commodity markets led traders to become more risk tolerant and sell the dollar, pushing the aussie higher. The pair gained approximately 100 pips on the day, closing near 0.7850 and the high of the day. Gold prices moved more than $5 an ounce higher on Thursday giving additional support to the Australian dollar.

The Cad (Usd/Cad) Oil prices moved higher on Thursday, crossing above the $65 a barrel level, strengthening the Canadian dollar. Higher equity markets also helped the Canadian currency as traders opted for higher yielding assets weakening the greenback. The pair dropped 90 pips, on the day, erasing Wednesday’s gains.

The Swissy (Usd/Chf) The swissy moved much lower on Thursday, losing 100 pips, erasing Wednesday’s gains, as the dollar weakened in the broad market. Switzerland’s trade surplus unexpectedly rose in April, coming in at 2.56B, much higher than the 0.11B that economists had expected. Switzerland will release the KOF economic barometer tomorrow morning.
The Yen (Usd/Jpy) The Japanese yen weakened significantly on Thursday, the most in eight weeks against the dollar, after an economic report released last night showed demand for overseas assets among Japanese investors is growing. Higher equity markets added to the Japanese currency’s weakness. The pair gained 140 pips, breaking above the 100 and 20 day simple moving averages and closing near 96.75.