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Dollar slips in profit taking
[NEW YORK] The US dollar sold off again on Thursday, staying on the defensive after last week's strong gains led to a bout of profit taking.
Very light summertime trading volumes exaggerated the US currency's weakness, said Omer Esiner of Commonwealth Foreign Exchange.
"The sell-off this week, which follows a very solid performance by the dollar last week, has little fundamental basis and is likely more a function of technical factors than any meaningful shift in sentiment," Mr Esiner said.
The dollar briefly gained a lift from a government report that new claims for US unemployment insurance benefits fell last week to their lowest level in nearly 42 years.
Many analysts view the downward trend in claims, a sign of the pace of layoffs, as pointing to further tightening in the US jobs market, which could support the Federal Reserve move toward a rate hike in the coming months.
"Investors have every reason to continue buying dollars as the case for Fed tightening hardens. But with Treasury yields ticking slightly lower and USD/JPY struggling to break above 124.50, there was very little participation" in Thursday's market, said Kathy Lien of BK Asset Management.
The euro found firmer footing after the Greek parliament voted to approve a second set of reform measures that cleared the path for the start of negotiations with the European Union and the International Monetary Fund on Greece's third bailout program.
But Lien warned the euro's gains were merely a "relief rally" that would not last.
"The bottom line is that Greece is not out of the woods. The path ahead will be challenging and there will be many road bumps that will deter investors from buying euros," she said.