Dollar gains as drop in US jobless claims boosts rate-hike bets

NEW YORK: The dollar gained against a basket of currencies on Thursday after data showed that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, boosting expectations the Federal Reserve may continue hiking interest rates if the economy remains strong.

Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 228,000 for the week ended July 15, the Labor Department said. Economists polled by Reuters had forecast 242,000 claims for the latest week.

The odds that the US central bank would continue to raise rates after a widely expected 25-basis-point increase next week edged higher after the data. Fed funds futures traders are pricing in an additional 34 basis points of tightening, up from expectations of another 32 basis points of increases on Wednesday.

“The market has been searching for signs of layoffs in the US and they simply aren’t materializing,” said Adam Button, chief currency analyst at ForexLive in Toronto. “Today’s initial jobless claims number underscores again that the US has an extremely strong labor market and that the Fed still has more work to do.”