Dollar bounces back from 5-month low against euro, but falls against yen and Swiss franc

Dollar rises against euro, slumps against yen

NEW YORK — The dollar bounced back Thursday from a five-month low against the euro but continued to drop against the yen and Swiss franc.

Weak European economic news hurt the euro while worries about U.S. growth weighed on the dollar.

In late afternoon trading in New York, the 16-nation euro fell to $1.3335 from $1.3390 late Wednesday. It peaked at a five-month high of $1.3440 Wednesday after the Federal Reserve hinted that it was ready to provide more aid to the U.S. economy. If the Fed acts, U.S. interest rates will likely drop further, hurting the dollar’s appeal for investors.

A monthly measure of business activity in Europe fell more than expected in September, while surging borrowing costs in indebted countries such as Ireland and Portugal underscored nagging worries about the prospect of government debt defaults.

The debt crisis that began in Greece earlier this year helped drive the euro to a four-year low in June before assistance from the European Union and International Monetary Fund helped calm investors.

Despite Thursday’s dip, the euro is up more than 2 percent against the dollar this week.

The dollar also continued to drop versus the yen and Swiss franc because of investor worries about U.S. growth and the expectation that the Fed will act. The government said Thursday that initial claims for unemployment aid rose last week for the first time in five weeks, underscoring the troubled job market.

The U.S. currency hit a 2 1/2 year low versus the Swiss franc for the second day in a row at 0.9807 Swiss francs. It fell to its weakest point versus the yen, at 84.27 yen, since the Bank of Japan intervened in currency markets last week. Traders are nervous that the Japanese government will have to intervene again if it wants to keep its currency weak to support the country’s exporters and Japan’s fragile economic recovery.

In late trading in New York, the dollar dropped to 84.38 yen from 84.54 yen, and fell to 0.9855 Swiss francs from 0.9870 Swiss francs.

Traders have recently sought safety in the yen and Swiss franc rather than the dollar as U.S. economic growth faltered.

In other moves Thursday, the British pound rose to $1.5696 from $1.5669, while the dollar gained to 1.0322 Canadian dollars from 1.0306 Canadian dollars.

AP Business Writer Pan Pylas contributed to this report from London.