NEW YORK: The dollar dropped to a more than four-month low on Thursday, as investors continued to sell the buck on expectations the US economy will likely underperform its peers in the developed world with the surge in new coronavirus cases.

By contrast, the euro held gains after hitting a nearly two-year high above $1.16 on Wednesday. A rise in US jobless claims in the latest week, the first time in four months, also added to the dollar's woes, as a persistent increase in Covid-19 cases has derailed the labour market and dampened consumer demand.

In midmorning trading, the index that measures the dollar against major currencies was down 0.1% at 94.934, after hitting its lowest since March 9. The dollar index has lost nearly 8% since its March 20 peak, when a global dollar funding crunch saw a surge in demand.

Against the safe-haven Japanese yen, the dollar was flat at 107.14. The euro was up 0.1% at $1.1581, just below a 21-month high of $1.1601 hit earlier on Wednesday amid agreement on a European recovery fund.

The Australian dollar retreated from a 15-month peak against the greenback to around US$0.7105, down 0.5%, while the New Zealand dollar fell 0.4% to US$0.6637, just below Wednesday's six-month top of US$0.6678. Elsewhere, China's offshore yuan partially recovered losses from an earlier slide against the US dollar, which was last down 0.1% at 7.009 yuan.