Dollar index rises to nearly seven-week high

NEW YORK (MarketWatch) — The dollar rose Thursday, with a broad gauge of the currency's strength hitting its highest level in nearly seven weeks, as investors sifted through U.S. economic data that included a strong reading on manufacturing.

Click to Play Jobless claims higher than expected

Brendan Conway takes a look at the markets, including three stocks to watch Thursday. Photo: Getty.

The ICE dollar index (DXY) , which pits the greenback against six other currencies, rose to 80.226 from 80.086 late Wednesday. That's the highest level since April 4, according to FactSet. The WSJ Dollar Index (XX:BUXX) , an alternate gauge of dollar strength, rose to 73.07 from 72.99.

U.S. manufacturing activity rose to a 3-month high in May, according to a flash purchasing managers index from Markit. Existing-home sales rose 1.3% in April to a seasonally adjusted annual rate of 4.65 million. That was the first increase since December but the gain missed market expectations, according to TD Securities. Housing data is of particular interest since Federal Reserve Chairwoman Janet Yellen said earlier this month the recent housing-market weakness should be monitored.

The PMI print was "a very healthy number, enough to offset any disappointment on the home-sales front," said Brad Bechtel, managing director at Faros Trading.

Weekly jobless claims jumped by 28,000 to 326,000 in the week ended May 17, coming in higher than expected. Continuing claims, which are filed by people already receiving benefits, fell by 13,000 to a seasonally adjusted 2.65 million in the week ended May 10.

Investors are speculating when the Fed could begin to raise interest rates, which would make dollar-denominated assets more attractive. Minutes from the Fed's April meeting, released Wednesday, revealed central-bank officials had discussed several ways to eventually tighten monetary policy but didn't decide on specific tools.

The dollar (USDJPY)  rose to 101.73 yen from ¥101.44 late Wednesday. Treasury yields rose Thursday.

The euro (EURUSD)  fell to $1.3654 from $1.3683 late Wednesday.

Markit's euro-zone composite purchasing managers index ticked down to 53.9 in May from 54.0 in April but is on track for its best quarter in three years. Performance continued to diverge between countries, with France swinging into contraction while Germany boasted strong growth.

The continued recovery in the euro zone, as demonstrated by the PMI data, is likely to dissuade the European Central Bank from taking aggressive easing actions at its June meeting, said Chris Williamson, chief economist at Markit, in a statement.

The British pound (GBPUSD)  declined to $1.6869 from $1.6899 in the prior session.

Investors also paid attention to a surprisingly strong report on Chinese manufacturing. HSBC's Chinese preliminary purchasing managers index in May rose to 49.7 from 48.1 in April, hovering just under the 50 level separating expansion from contraction.

The Australian dollar (AUDUSD)  was at 92.24 U.S. cents versus 92.34 U.S. cents.

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