U.S. Dollar Drops Amid Fed's Rate Cut Speculation

The U.S. dollar weakened against the other major currencies in the early European session on Friday, as soft U.S. economic data raised hopes that the Federal Reserve may delay its rate hike.

Data from the Labor Department on Thursday showed that U.S. initial jobless claims unexpectedly saw another increase in the week ended April 11th. The report said initial jobless claims climbed to 294,000, an increase of 12,000 from the previous week's revised level of 282,000. The increase came as a surprise to economists, who had expected jobless claims to edge down to 280,000 from the 281,000 originally reported for the previous week.

Data from the Commerce Department showed that U.S. housing starts rose 2.0 percent to an annual rate of 926,000 in March after tumbling 15.3 percent to a rate of 908,000 in February. Economists had been expecting housing starts to jump to a rate of 1.04 million.

The report also showed that U.S. building permits, an indicator of future housing demand, fell 5.7 percent to an annual rate of 1.039 million in March after climbing 4 percent to a rate of 1.102 million in February. Economists had been expecting building permits to show a much more modest decrease to a rate of 1.085 million.

Traders are keenly waiting for the reports on U.S. consumer price inflation, consumer sentiment and leading economic indicators, for clues on the timing of a Fed rate hike. Spring meetings of the World Bank Group and the International Monetary Fund, due later in the day, will be also in focus.

In the Asian trading, the U.S. dollar held steady against its major rivals.

In the European trading today, the U.S. dollar fell to nearly a 3-month low of 0.7706 against the NZ dollar, from an early high of 0.7644. On the downside, 0.79 is seen as the next support level for the greenback.

Against the pound, the greenback slipped to more than a 4-week low of 1.5035 from an early high of 1.4915. The greenback may test support near the 1.51 region.

Pulling away from an early high of 0.9583 against the Swiss franc, the greenback dropped to nearly a 2-week low 0.9529. The next possible downside target for the greenback is seen around the 0.93 level.

The greenback depreciated to a 2-week low of 118.72 against the yen, from an early high of 119.12. The greenback is likely to find support around the 117.00 region.

Against the Australia and the Canadian dollars, the greenback dropped to 0.7817 and 1.2162 from early highs of 0.7769 and 1.2204, respectively. If the greenback extends its downtrend, it is likely to find support around 0.79 against the aussie and 1.19 against the loonie.

The greenback slid to a 9-day low of 1.0832 against the euro, from an early high of 1.0737. The greenback may test support near the 1.11 region.

Looking ahead, Canada CPI for March and retail sales data for February, U.S. CPI for March, U.S. Reuters/University of Michigan's preliminary consumer sentiment index for April and U.S. leading indicators for March are set to be published in the New York session.