RTTNews - The dollar paused from a dramatic recent downtrend versus other majors Thursday morning after global stocks hit the skids in reaction to a sobering assessment of the economic situation offered by the Federal Reserve.

Risk averse traders flirted with the dollar in early dealing, but interest remained relatively tepid as the overall mood remains somewhat optimistic about the prospects of a global recovery starting as early as late-2009.

The minutes of the last FOMC policy-making meeting revealed that Fed governors foresaw a deeper recession than initially projected.

Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time, the statement read.

Following a brutal stretch that drove the dollar to depths not seen in 2009, the dollar enjoyed its biggest rebound against the sterling, rising to almost 3 cents to 1.5510 before leveling off.

Late last night, the dollar hit a 6-month low of 1.5816 but steadied after Standard & Poor's revised the outlook on the United Kingdom to negative from stable. The rating agency affirmed 'AAA' long-term and 'A-1+' short-term sovereign credit ratings.

Standard & Poor's credit analyst David Beers said, We have revised the outlook on the U.K. to negative due to our view that, even assuming additional fiscal tightening, the net general government debt burden could approach 100% of GDP and remain near that level in the medium term.

The dollar was uncertain versus the euro Thursday morning after dropping to a 4-month low of 1.3838 in early dealing. The dollar has fallen sharply against the euro this week, breaking out of a long-term trading range on speculation that the euro zone may not lag far behind others in returning to economic expansion.

The decline in Eurozone private sector activities slowed further in May, indicating that the worst of the recession may be over, reports said Thursday, citing data released by the Markit Economics.

The Markit flash Eurozone composite output index rose to an eight month high of 43.9 in May from 41.1 in April, beating the forecast of 42.

The dollar pared a fraction of its recent losses versus the yen Thursday morning, holding near 95 after slipping to a 2-month low of 94.27 overnight.

Thursday's trading is likely to be impacted by the release of the weekly jobless claims report from the U.S. Labor Department for the week ended May 16th. Economists expect first time jobless claims at 640,000, following previous weekly figures which showed a decline of 637,000. The report is set to be released at 8:30 a.m. ET.

Traders will also focus on the Philadelphia Fed's manufacturing survey for May and the Conference Board's leading indicators for April. The reports are both scheduled for release at 10:00 a.m. ET.

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