CURRENCIES: U.S. Dollar Steadies After 4-day Selloff

By Anora Mahmudova and Victor Reklaitis, MarketWatch Features Dow Jones Newswires

British pound rises above $1.30 for the first time since September

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The U.S. dollar staged a modest rebound after days of weakness with the sentiment boosted by a pair of stronger-than-expected data releases.

Data on weekly jobless claims (http://www.marketwatch.com/story/americans-on-unemployment-rolls-lowest-since-1988-2017-05-18)showed that the number Americans on unemployment fell mid-May to the lowest level since 1988, underscoring the strongest labor market in years. Manufacturing in the Philadelphia region (http://www.marketwatch.com/story/philly-fed-index-soars-to-388-in-may-2017-05-18) showed unexpected strength in May, according to data released Thursday, a sign that the factory sector could be on solid ground.

The ICE Dollar Index , a measure of the currency against a basket of six major rivals, on Thursday was up 0.1% at 97.66. On Wednesday, the index fell to the lowest seen Nov. 8 Election Day.

The U.S. dollar has been hit this week (http://www.marketwatch.com/story/dollar-edges-down-as-analysts-blame-trump-worries-2017-05-17) by escalating U.S. political concerns, with President Donald Trump hit by claims that he tried to influence a probe into links between his inner circle and Russia.

The euro was trading at $1.1111, down from $1.1159 late Wednesday in New York, while the dollar bought Yen111.27, up from Yen110.81 late Wednesday.

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"It is very clear that the dollar is very sensitive to news coming from Washington. If the current situation escalates to match the size and seriousness of past scandals such as Watergate or Iran-Contra, it would undeniably be negative for the dollar," said Neil Mellor, chief currency strategist at BNY Mellon.

In other currency pares, the British pound jumped to trade above $1.30 first time since September following a better-than-expected reading on U.K. retail sales, as the dollar largely continued to lose ground against its major rivals.

Even with Thursday's jump, the pound remains down by about 13% against the dollar since June 23. That's when the U.K. voted to leave the European Union, leading currency traders to bet that Brexit will hurt the British economy.

The British currency was changing hands at $1.3005, up from $1.2971 late Wednesday in New York. It traded as high as $1.3046 intraday after data showed U.K. retail sales grew by 2.3% on the month in April (http://www.marketwatch.com/story/uk-retail-sales-rebound-overshoot-expectations-2017-05-18), well above expectations.

"The combination of the U.K.'s surging consumer spending and U.S. President Trump's firestorm has decisively tilted the balance of power in favor of the pound over the dollar," said David Lamb, head of dealing at Fexco Corporate Payments, in a note.

"Britain's wage squeeze may have scotched any slim hope of the Bank of England raising rates this year, but the U.K. economy continues to create jobs at a prodigious rate and its retail boom is still in full swing," he said.

Among emerging market currencies, Brazilian real plunged nearly 8% with the dollar buying 3.3890 from 3.1369 late Wednesday, after news reports that President Michel Temer encouraged a businessman to continue bribing a jailed former congressman to buy the lawmaker's silence.

Brazilian stock market dropped 10% on the news, triggering circuit breakers that halted trading.

Other emerging market currencies, such as Turkish lira, Mexican peso and South African rand all weakened amid wide-spread risk-off sentiment. The dollar was buying 3.6137 Turkish lira , up 1.3% from 3.5680 late Wednesday in New York. Mexican peso fell 0.4% with the dollar buying 18.85 peso, up from 18.7865.

South African rand fell 1.6% with the dollar buying 13.4229 on Thursday.

(END) Dow Jones Newswires

May 18, 2017 11:58 ET (15:58 GMT)