Investors flock to dollar after Deutsche Bank stock issue raises fears over European economy

Dollar rises on Deutsche Bank stock issue

NEW YORK — The dollar rebounded against the euro late Thursday following reports that Germany’s biggest bank is raising 9 billion euros in a stock issue, undermining confidence in the European banking system.

The euro fell to $1.27 against the dollar in afternoon trading in New York, down from $1.2724 in Wednesday’s late trading.

Investors fled the safety of the dollar in earlier trading after a steep drop in U.S. unemployment claims offered the latest encouraging sign about the nation’s economy.

The U.S. Labor Department said first-time claims for unemployment benefits fell sharply last week to 451,000, backing up signs that the jobs market has improved modestly in the past few weeks. A report Friday showed private employers added more workers in August than anticipated.

Unemployment claims still haven’t fallen enough to indicate strong jobs growth or a robust economy in the U.S, but they seem to have diminished worries the country will fall back into recession.

The news from Deutche Bank unsettled investors, bringing back worries over European banks. Stocks had fallen on Tuesday following a report that a series of “stress tests” on those banks earlier this year had failed to uncover the full amount of risky government debts on their books.

“Deutsche Bank is viewed as a pillar of strength in the Eurozone. If they need to raise capital, what about the rest of the banks?” said David Gilmore, partner Foreign Exchange Analytics in Essex, Conn. “It was a bit of a wake-up call.”

The British pound also slipped against the dollar after that country’s central bank kept a key interest rate steady at 0.5 percent for the 18th straight month. The pound fell to $1.5430 from in afternoon trading from $1.5480 late Wednesday.

Higher interest rates, a weapon against inflation, support a currency by making some assets denominated in that currency more attractive to investors.

The dollar fell to 83.90 Japanese yen from 83.98 yen the day before, just above the 15-year low touched earlier this week.

In other trading, the dollar bought 1.0156 Swiss francs, up from 1.0118 late Wednesday. The dollar weakened against the Canadian dollar, falling to 1.0332 Canadian dollars from 1.0365.