NEW YORK, Sept 9 (AFP) - The dollar was mixed Thursday as investors reacted cautiously to news of a sharp drop in first-time jobless claims in the United States and hedged their forecasts about US rate increases.
The euro climbed to 1.2211 dollars at 2100 GMT against 1.2182 late in New York on Wednesday, having fallen as low as 1.2160.
The dollar traded at 109.65 yen, up from 109.34 a day earlier.
The dollar initially jumped on a report from the US Labor Department that weekly claims declined 44,000 to 319,000, the sharpest fall since December 2001.
But traders later determined that the figures had been affected by recent storms that have battered Florida as well as by problems adjusting for seasonal factors.
Strong employment numbers over the coming months would confirm that the disappointing jobs data in June and July represented what US Federal Reserve chairman Alan Greenspan referred to as a "soft patch" in the US economy.
Robust jobs growth would likely provide a green light to the Fed to lift the cost of borrowing more aggressively than it has already.
The rate-setting Federal Open Market Committee has raised its key Fed funds futures rate by a quarter point each time at its last two meetings to 1.50 percent and is widely tipped to hike it by a similar amount at its upcoming meeting September 21.
Analysts expressed caution about Thursday's job claim data.
John Ryding of Bear Stearns said claims were likely to be volatile over the next few weeks due to the hurricanes in Florida.
"We believe that last week's initial claims data were depressed by both the reversal of the Hurricane Charley effect and the impact of Hurricane Frances (the closure of claims offices and difficulty in filing due to evacuations)," he said.
Overall, analysts said dollar sentiment remained relatively fragile following Greenspan's testimony to the House Budget Committee.
In his speech, the Fed chief said the US economy had regained its footing after experiencing a dip in the summer but noted that inflation expectations had diminished despite the rise in oil prices through mid-August.
Some analysts said meanwhile that Greenspan failed to reassure markets that the US economy was on track.
"Those who think that just because he said (as the headlines focused exclusively on) that 'the expansion has regained some traction,' missed the point," Merrill Lynch economist David Rosenberg said.
"He is clearly less convinced over his bullish macro forecast and now believes that the low inflation story is intact."
Meanwhile, the pound remained near six-month lows against the euro in the wake of news that the British trade position deteriorated further in July as the country sucked in more imports than it has ever done in a single month.
The Office of National Statistics said the British deficit in goods increased to 5.2 billion pound sterling in July, up from 5.1 billion the previous month, and blamed the development on a marked increase in oil imports, which pushed the oil balance into deficit for the first time since August 1991.
There was little impact on the pound from Thursday's decision by the Bank of England to keep interest rates on hold at 4.75 percent.
In late New York trading, the dollar stood at 1.2615 Swiss francs from 1.2600 Wednesday.
The pound was at 1.7861 dollars from 1.7863 late on Wednesday.