New York - The dollar hit a more than six-year peak against the yen on Thursday on data showing US jobless claims fell more than expected last week, while global equity markets rallied after the Federal Reserve again pledged to keep interest rates low.
The dollar index, a gauge of the greenback's value against six currencies, climbed to its strongest in more than four years, supported by the Federal Reserve's interest rate forecasts that were higher than those projected in June.
Markets eyed a widening policy split between the United States and other rich nations that in the future will push US rates higher, strengthening the dollar.
Some strategists were surprised at the extent of the dollar's rally and felt investors have put too much credence in the rate forecasts, instead of what Fed officials said.
“The dollar will be in a consolidation phase in the short term after yesterday's sharp gains,” said Greg Moore, senior currency strategist at RBC Capital Markets in Toronto.
“Even Janet Yellen yesterday was reluctant to commit to any rate scenario,” he said.
The dollar rose as high as 108.96, the strongest since August 2008, and last traded at 108.67, up 0.28 percent.
The euro rebounded, rising 0.37 percent to $1.2912.
Wall Street rallied, with both the benchmark S&P 500 and Dow setting new intraday highs.
The Dow Jones industrial average was up 92.26 points, or 0.54 percent, at 17,249.11.
The Standard & Poor's 500 Index was up 9.13 points, or 0.46 percent, at 2,010.70.
The Nasdaq Composite Index was up 25.08 points, or 0.55 percent, at 4,587.26.
In Europe, the FTSEurofirst 300 index of top regional shares rose 0.89 percent to 1,397.43.
MSCI's all-country world index rose 0.24 percent to 428.51.
US Treasury debt prices turned down, with investors driving some shorter-maturity yields to highs not seen since May 2011 after the Fed on Wednesday raised its forecasts for some interest rates.
Yields on two-year notes touched a high of 0.597 percent before settling back to 0.5767 percent on a 1/32 price decline.
That level was last seen in May 2011.
Yields on benchmark 10-year Treasury notes were up to 2.6308 percent on a price decline of 9/32.
The number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting a sharp slowdown in job growth last month was probably an aberration.
While other US data on Thursday showed some weakness in home building and factory activity, the underlying trend remained supportive of solid economic growth.
Oil traded lower, pressured by ample supply and concern over a weakening of demand growth in major consumer nations, as well
as by the dollar's rise.
A stronger dollar makes dollar-priced commodities such as oil more expensive for buyers using other currencies but tends to weigh on oil prices.
Brent was down 95 cents at $98.02 a barrel, while US crude was down 43 cents at $93.99 a day after dropping on government data that showed US crude inventories rose 3.7 million barrels last week. - Reuters