The US dollar gained against a mixed basket of currencies after a government report showed weekly claims for jobless benefits decreased in the latest period while continued claims reached a fresh record high. The news drove slight safe haven flows into the US dollar as speculation mounts that the economic recovery is not imminent. The greenback also rose the most against the yen this month after the Federal Reserve refrained from increasing purchases of Treasuries and mortgage securities.

The euro weakened against the US dollar as risk aversion returned to the market. A rise in euro zone unemployment to 8.9 percent in March from an upwardly revised 8.7 percent in February underlined the view that the euro zone economy remains weak. Other data showed that euro zone inflation remained at a record low of 0.6 percent year-on-year in April. The single currency should remain under pressure as the European Central Bank will probably lower its benchmark interest rate to 1 percent from 1.25 percent at its policy meeting on May 7.

Sterling rose to a two-week high against a broadly lower US dollar as risk appetite resumed on positive sentiment for the global economy, which also boosted share prices. The pound was also pushed higher on improvement in British consumer confidence data, although a report that US automaker Chrysler will file bankruptcy capped gains as well as separate data that showed UK house prices fell.

The Japanese yen weakened against the US dollar and fell to a two-week low versus the euro and the Canadian dollar as better than estimated corporate profits reported in April and a decline in currency swings spurred investors to buy higher-yielding assets.

The Canadian dollar climbed to its highest level in nearly four months as improved market sentiment helped the Canadian currency break through a key technical level. Mounting speculation that the worst of the recession may be over boosted investor appetite for higher-yielding assets such as stocks and commodity-linked currencies, pushing the Canadian dollar even higher.

The Australian dollar rose to its highest level since early October, boosted by increased appetite for riskier assets amid hopes the worst of the global recession might be over. The Aussie dollar is benefiting from a string of better global economic data and a note of optimism from the Federal Reserve. In other news, the Reserve Bank of Australia will hold its next policy meeting on Tuesday and is widely expected to hold rates at 3 percent. The New Zealand dollar fell around a cent against the US dollar and hit a seven-week low against the Aussie dollar after the central bank cut interest rates by 50 basis points to a record low 2.5 percent and pledged to keep them low until late 2010.

Indicative rates:

EUR/USD 1.3266

USD/JPY 97.92

GBP/USD 1.4842

USD/CAD 1.1864

USD/MXN 13.8360

USD/CHF 1.1363

AUD/USD 0.7383

NZD/USD 0.5723

USD/DKK 5.6236

USD/SEK 8.0401

USD/NOK 6.5761

USD/TWD 33.075

USD/CNY 6.8180

10-Year Treasury Note Yield : 3.159%

Dow Jones Industrial Average : 8,288.71 + 103.14