Dollar rises amid economic jitters

Europe may halt rate cuts

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NEW YORK (CNNMoney.com) -- The U.S. dollar gained strength against major currencies Thursday as economic worries about the state of the global economy persisted and the number of U.S. workers filing for first-time unemployment benefits fell more than expected.

The yen retreated from the 13-year high it reached against the dollar Wednesday ahead of an interest rate decision from the Bank of Japan. The Japanese currency fell against the dollar Thursday, increasing to ¥89.43 from ¥87.23 late Wednesday.

At 0.3%, Japan has the second-lowest rate among the world's major economies and investors were taking a step back ahead of Friday's announcement.

The 15-nation euro fell nearly two cents to $1.4243 from $1.4418.

The European Central Bank's next meeting is set for January, and investors are watching to see whether the bank will keep its rate firm after slashing it to 2.5% earlier this month.

The British pound dropped more than five cents to $1.5011 Thursday from $1.5534.

Currently, the Bank of England's rate remains at 2%, the lowest in the bank's history, and policymakers are slated to meet in January to discuss the rate.

The number of Americans filing for first-time unemployment benefits fell more than expected last week, according to a government report released Thursday. Initial filings for state jobless benefits fell to 554,000 for the week ended Dec. 13.

Oil prices fell below $37 a barrel Thursday, reaching level not seen since June 2004. Investors continued to shrug off an upcoming OPEC production cut announced on Wednesday, after which oil closed at a 4 1/2 year low.

On Tuesday, the Federal Reserve cut its federal funds rate from 1% to a range between 0% and 0.25%, the bank's 10th cut since September 2007.

While interest rate cuts are the U.S. central bank's main tool for boosting economic activity, many currency analysts worry about the long-term effects of lower interest rates on the dollar.