NEW YORK (CNN/Money) - Treasurys rallied and the dollar fell Thursday as a report on durable goods proved to be weaker than expected, adding to speculation that the Federal Reserve would shy away from an aggressive interest rate hike.

At about 4:40 p.m. ET, the benchmark 10-year note leaped 14/32 of a point in price to 100-26/32, driving its yield down to 4.64 percent from 4.70 percent late Wednesday.

The 30-year bond rose 23/32 of a point in price to 100-18/32 to yield 5.34 percent, down from late Wednesday's 5.38 percent. Bond prices and yields move in opposite directions.

The two-year note climbed 1/32 of a point in price to 99-31/32 to yield 2.76 percent, while the five-year note gained 8/32 of a point to in price to 100-25/32 to yield 3.84 percent.

Bonds were also supported by safe-haven bids after a second explosion in Turkey, this one in Istanbul. Earlier, an explosion was heard near the Ankara hotel where President Bush is due to stay on Saturday, while attacks in Iraq left at least 90 people dead.

In the currency market, the euro bought $1.2176, down from its session high of $1.2183 but still up from $1.209 late Wednesday. The dollar tumbled to ¥107.15 from about ¥108.53 late yesterday.

Orders for durable goods fell 1.6 percent in May, when analysts had looked for a 1.4 percent gain. Orders for nondefense goods excluding aircraft, a proxy for investment, dropped 3.0 percent, surprising analysts and tempering the market's expectations for aggressive tightening from the Fed.

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"It takes pressure off the Fed to hike interest rates more dramatically [than a quarter point] in August or put together a more forcefully worded statement next week [at its monetary policy meeting]," Cary Leahey, senior U.S. economist at Deutsche Bank Securities, told Reuters.

First-time jobless claims rose 13,000 to 349,000 in the week ended June 19, from 336,000 the prior week, the Labor Department said. Economists had forecast a smaller climb to 340,000 new claims.

New home sales surged to an annual rate of 1.37 million in May -- a record high -- up nearly 15 percent from a revised annual rate of 1.19 million in April, the Commerce Department said. Economists expected sales to grow at a rate of 1.13 million new homes.  

-- from staff and wire reports