Dollar firmer on disappointing economic reports

NEW YORK — Investors fled to the safe haven of the dollar Thursday as unsettling reports on manufacturing and the labor market overshadowed good news on housing and consumer spending.

The dollar, which has been sold off heavily in recent weeks, benefits on worries about the economy as investors trade their positions in higher-yielding assets for the traditional safe-haven currency.

The 16-nation euro slid to $1.4537 in late New York trading from $1.4646 late Wednesday, while the British pound fell to $1.5950 from $1.6008. The dollar inched up to 89.74 Japanese yen from 89.63 yen.

First-time claims for jobless benefits jumped more than expected last week to 551,000, while a private measure of the manufacturing sector grew at a slower pace in September than in the previous month. Even though consumer spending increased by the most in nearly eight years in August, economists questioned whether the improvement can be sustained as households face unemployment and tight credit conditions.

Meanwhile, the National Association of Realtors said pending home sales rose in August.

Several U.S. economic reports this week have raised doubts about the strength of a recovery. U.S. data showed a surprise drop in consumer confidence but also a third consecutive monthly increase in home prices.

Overseas, a report Thursday showed retail sales in Germany, Europe’s biggest economy, fell 1.5 percent on the month in August, suggesting household spending remains weak despite the country’s gradual recovery from recession.

The International Monetary Fund said the euro zone faces a sluggish recovery in the short term because banks in the region still have a way to go in cleaning up their finances.

Traders are now anxious ahead of the U.S. non-farm payrolls report to be released Friday, according to Michael Woolfolk, senior currency strategist at Bank of New York Mellon.

“As players brace for the quarterly earnings season later this month, mixed U.S. data may be increasingly viewed negatively, providing further fuel for the current dollar correction,” Woolfolk said.

The correction “may go on longer than previous corrections, and that will continue to put downward pressure on commodities and (equity markets),” Brown Brothers Harriman currency strategists in New York wrote in a note to investors.

Also Thursday, Federal Reserve Chairman Ben Bernanke responded to comments raised by China and in recent days by World Bank President Robert Zoellick about replacing the dollar as the international currency with a new currency. At a hearing before the House Financial Services Committee, Bernanke said he does not believe there is an immediate risk to the dollar.

“It’s a relatively long-term issue,” Bernanke said. “I also agree with (Zoellick), though, that if we don’t get our (macroeconomic) house in order that that will put the dollar in danger, and that the most critical element there is long-term fiscal stability.”

Markets will be keeping a close eye on this Saturday’s meeting of finance ministers from the Group of Seven leading industrial nations to see if they go beyond the normal platitudes about currencies and try to support the dollar.

In other late trading Thursday, the dollar jumped to 1.0841 Canadian dollars from 1.0685 late Wednesday, and climbed to 1.0413 Swiss francs from 1.0357 francs.

AP Economics Writer Jeannine Aversa in Washington contributed to this report.