Global stock markets and commodities also gained. Even the beleaguered euro managed to post gains on better-than-expected euro zone manufacturing data, though analysts warned the common currency's strength will likely be shortlived as Greece continues to struggle with issues of sovereign debt.
"Collectively, the data then will provide another serious kicker" for currencies considered strongly tied to global growth, said Alan Ruskin, global head of currency strategy for RBS Securities in Stamford, Conn.
Meanwhile, the Swiss National Bank on Thursday just before noon was suspected of intervening in currency markets, traders said, to temper franc strength. The euro and dollar both hit intraday highs against the Swiss currency and retained most of their gains into the late afternoon.
With liquidity tapering as European traders exited the market and just ahead of the Easter holiday, the "very quick and rapid" lurch in the Swiss franc made it apparent the SNB was in the market for "maximum impact," said Camilla Sutton, currency strategist at Scotia Capital in Toronto. Traders suspected the SNB last intervened in markets on March 10.
To see the euro's moves against the Swiss franc, please see:
Late Thursday afternoon, the dollar was at Y93.88 from Y93.46 late Wednesday, according to EBS via CQG, while the euro was at Y127.55 from Y126.28. The dollar was at $ 1.3585 from $ 1.3509. The UK pound was at $ 1.5290 from $ 1.5183. The dollar was at CHF1.0543 from CHF1.0540.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.718 from 81.072.
In the US, factory operators reported their best month of activity in nearly six years during March, with the Institute for Supply Management's index of manufacturing activity for March at 59.6, from 56.5 the month before and 58.4 in January. March's level was above the 57.0 economists had expected to see, and it was the highest reading since July 2004. Readings over 50 indicate growth. Markit Economics index, based on a survey of 3,000 euro-zone firms, rose to 56.6 in March from 54.2 in February, posting its fastest rate of expansion in 40 months. China's official Purchasing Managers Index stood at 55.1 in March, the 13th straight monthly gain.
The US manufacturing report "is supporting the Fed's eventual need to normalize interest rates," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York. A steady stream of strong US economic data brings forward expectations the Federal Reserve will raise key rates at a faster clip than its peers in Japan and the euro zone, supporting the greenback, Woolfolk said.
The manufacturing data sent the dollar to Y94.05, a seven-month high against the low-yielding Japanese currency.
The dollar had risen steadily against the yen overnight as Thursday also marked the beginning of a new Japanese fiscal year, and Japanese companies could redeploy funds abroad that had been repatriated to Japan before the closing of the previous year's books.
As investor sentiment improved, the dollar slipped against the euro by afternoon trading, but concerns over fiscally strapped Greece should keep the common currency restrained, analysts said. The euro falters each time it ticks above $ 1.3550, said Brian Dolan, chief currency strategist at Forex . com in Bedminster, NJ
Investors now await Friday's US payrolls report, which is expected to show a gain in employment after a fall of about 30,000 in February. But there are fears the number will be lower than hoped for after the ADP employment survey Wednesday showed private-sector jobs fell by 23,000 last month instead of rising by 50,000 as expected.
With the ICE Dollar Index falling, Deutsche Bank's PowerShares US Dollar Index Bearish exchange-traded fund was up 0.45% from late Wednesday, while its PowerShares US Dollar Index Bullish was down 0.59%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of ICE's Dollar Index.
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