Dollar Loses Ground Against Major Rivals

(RTTNews) - The U.S. dollar shed ground against some of its major counterparts on Thursday after the European Central Bank announced a bigger than expected 0.5% hike in interest rates to combat inflation.

In U.S. economic news, data from the Labor Department showed initial jobless claims crept up to 251,000 in the week ended July 16th, an increase of 7,000 from the previous week's unrevised level of 244,000. The uptick surprised economists, who had expected jobless claims to edge down to 240,000.

A separate report released by the Federal Reserve Bank of Philadelphia showed regional manufacturing activity unexpectedly contracted at a faster rate in the month of July.

The Philly Fed said its current general activity index slumped to a negative 12.3 in July from a negative 3.3 in June, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to rebound to a positive 0.4.

The Conference Board also released a report showing its index of leading economic indicators decreased for the fourth straight month in June. The report said, the CB's leading economic index slumped by 0.8% in June after falling by a revised 0.6% in May.

Economists had expected the leading economic index to decline by 0.5% compared to the 0.4% drop originally reported for the previous month.

The dollar index, which recovered to 107.32 after having dropped to 106.42 after the ECB announced its rate decision, faltered again and was last seen hovering around 106.60, down nearly 0.5% from the previous close.

Against the Euro, the dollar slid to $1.0279 after ECB's announcement, but regained some lost ground subsequently and is trading at $1.0229.

The European Central Bank today announced its decision to raise interest rates by 50 basis points, marking the first rate hike in over a decade.

"The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalisation path than signalled at its previous meeting," the ECB said.

The Pound Sterling is gaining against the greenback, fetching $1.1990 a unit, compared with $1.1978 on Wednesday.

Against the Japanese currency, the dollar has weakened, fetching 137.42 yen a unit, about 0.6% less than the previous close.

The dollar has dropped to $0.6927 against the Aussie. The Swiss franc has firmed to 0.9667 a dollar, gaining from 0.9711. The Loonie is up marginally at C$1.2871.