BERLIN — The dollar fell to a new record low against the euro on Thursday, with the 13-nation European currency breaking through the $1.43 mark for the first time after Washington reported a spike in jobless claims.
The euro rose to $1.4305 in early afternoon trading in Europe shortly after the U.S. Labor Department reported that applications for jobless benefits hit 337,000 last week — up 28,000 from the week before and the biggest one-week surge since claims jumped 42,000 in the week of Feb. 10.
It settled back slightly, to $1.4290, but that was still up more than a penny from the $1.4186 it bought in late New York trading on Wednesday and was higher than the previous record of $1.4282 set Oct. 1.
The jobless increase was four times the gain of 6,000 that economists had been expecting and was taken as a possible sign that the labor market is starting to weaken under the impact of a housing downturn and turmoil in credit markets.
Earlier this week, both Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke warned that the housing crisis was likely to last longer than had been expected.
On Wednesday, the U.S. Commerce Department said the construction of new homes and apartments dropped to a 14-year low in September while the National Association of Home Builders' survey of builder confidence plunged in early October to the lowest level ever recorded in the 22-year history of the survey.
Analysts still believe the economy will be able to avoid a recession because they think the Federal Reserve, which cut interest rates for the first time in four years in September, will reduce rates further should conditions weaken.
That has helped drive the dollar down against other major currencies, however, because even though lower interest rates can jump-start the economy they can weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns.
In other trading, the British pound climbed to $2.0481 from $2.0355 in New York on Wednesday, while the dollar slipped to purchase 115.48 Japanese yen from 116.55 the day before.