NEW YORK: The dollar turned mixed on Thursday, finding spotty support from solid U.S. data that suggested the U.S. labor market continues to strengthen despite signs of an economic slowdown in the first quarter.
A rally for the euro against the dollar and yen was seen being dictated by investors taking profits on recent greenback strength heading into the long Easter holiday weekend that will be punctuated by the important March U.S. employment report on Friday.
"If someone had a position of dollar strength and euro weakness heading into the report, this euro gain today is likely some profit taking and/or positioning by Europeans who won't be around to trade it on the day. That's creating this volatility as people head out for the long holiday weekend," said John Doyle, director of markets at Washington, D.C.-based Tempus Inc.
Markets in most of Europe will remain shut on Friday and Monday for Easter holidays. The U.S. bond market will have a shortened session while the U.S. stock market will be shut on Friday.
On Thursday, data showed the number of weekly applications for new employment benefits fell unexpectedly while February's U.S. trade deficit narrowed to it lowest point since October 2009. However that still is unlikely to change views that U.S. economic growth slowed sharply in the first quarter.
"This data, after disappointments, will help the dollar but the focus is still on Friday's jobs report," said Vassili Serebriakov, currency strategist at BNP Paribas in New York.
A Reuters poll expects non-farm payrolls to rise by 245,000 jobs in March, after gaining 290,000 in February.
"If we get a stronger number the dollar will rally and likely, on a relative basis, the most against the yen because estimates show that positioning there has been reduced to flat," said Serebriakov.
In mid-morning New York Trade, the dollar erased its losses to trade unchanged at 119.75 yen on the EBS trading platform .
The euro rallied over 1 percent against both the U.S. dollar and the yen, trading at $1.08930 and 130.29 yen , respectively.
Even with the euro's present rally, the interest rate differential between the U.S. and Europe is expected to grow as the European Central Bank maintains its money-printing quantitative easing policies.
Minutes from the ECB's March 5 meeting showed monetary policymakers agreed to "remain firm" in implementing the QE program, even though the economic outlook is improving.
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