Dollar and yen ease

Click on the chart to see other foreign exchange rates.

Dumbest Moments in Business 2009...midyear edition

View photos

Quick Vote

How much did you spend out of pocket for health care last year?

• Under $1,000
• $1,000 to $5,000
• $5,000 to $10,000
• More than $10,000

or View results

NEW YORK (Reuters) -- The dollar fell against most currencies on Thursday and the yen surrendered recent gains as investors pared back on safety trades after data showed a sharp decline in the number of Americans filing for initial jobless benefits, easing concern about the U.S. economy.

The data encouraged investors to buy riskier assets like stocks and high-yielding currencies and sell both the dollar and yen, which are often used to finance such risky trades.

The dollar rose against the yen as the Japanese currency, which had soared on Wednesday on heavy safe-haven flows, pulled back sharply on Thursday.

"The violence of the move yesterday was a surprise, so I'm not surprised to see a bounce back," said David Watt, senior currency strategist at RBC Capital markets in Toronto.

"People now wonder which trend will be more powerful -- the one seen over the last five days when people sold risky assets or the one today where they're buying risky assets back."

The dollar was up 0.2% at ¥92.99 after hitting ¥91.82 on Wednesday, a five-month low. The dollar's decline versus the yen on Wednesday was its biggest one-day loss since March.

The yen retreated against the dollar after a Japanese government spokesman said excessive exchange rate moves are undesirable.

The euro was last up 1.2% at $1.4038. It rose 1.3% to ¥130.48 after nearing ¥127 on Wednesday, a two-month low.

The pound rose 1.7% to $1.6335 after the Bank of England did not increase purchases of financial assets, quelling market fear about a possible rise in UK inflation.

Data showing the largest drop in initial U.S. jobless claims since December renewed some appetite for risk, though continued claims rose to a record.

But from here, "a lot will depend on forthcoming earnings reports and how the equity markets respond," Watt said.

Strategists at CitiFX warned against chasing the euro higher and suggesting selling it at $1.4055 in anticipation of an eventual move back to $1.3318, its 200-day moving average against the dollar.

Among other currencies seen as higher risk, the Australian dollar rose 0.7 % to $0.7848, though analysts said the currency is highly sensitive to concerns about Australia's ties with top trading partner China.

China confirmed Thursday the arrest of an Australian mining executive and three others on spying allegations in a case that has raised questions about China-Australia relations.

U.S. traders said volatility in the Swiss franc around the same time as the U.S. data release was sparked by market talk that Swiss National Board member Thomas Jordan had said the central bank wants to prevent further franc appreciation.

The SNB has intervened in the market in recent months to weaken the franc, and this would have been the standard comment on the currency if he had spoken. The SNB declined to comment. The dollar was down 1.2 % at 1.0774 Swiss francs.