* Yen drops, correcting sharp gains from Wednesday
* Euro surges vs dollar as risk appetite recovers
* U.S. initial jobless claims bolster optimism a little
* Sterling shines as BoE keeps QE target unchanged
* Aussie gains but Australia-China rift casts shadow
(Updates prices, adds comment, changes byline)
By Steven C. Johnson
NEW YORK, July 9 (Reuters) - The dollar fell against most
currencies on Thursday and the yen surrendered recent gains as
investors pared back on safety trades after data showed a sharp
decline in the number of Americans filing for initial jobless
benefits, easing concern about the U.S. economy.
The data encouraged investors to buy riskier assets like
stocks and high-yielding currencies and sell both the dollar
and yen, which are often used to finance such risky trades.
The dollar rose against the yen as the Japanese currency,
which had soared on Wednesday on heavy safe-haven flows, pulled
back sharply on Thursday.
"The violence of the move yesterday was a surprise, so I'm
not surprised to see a bounce back," said David Watt, senior
currency strategist at RBC Capital markets in Toronto.
"People now wonder which trend will be more powerful -- the
one seen over the last five days when people sold risky assets
or the one today where they're buying risky assets back."
The dollar was up 0.2 percent at 92.99 yen <JPY=> after
hitting 91.82 yen on Wednesday, a five-month low. The dollar's
decline versus the yen on Wednesday was its biggest one-day
loss since March.
The yen retreated against the dollar after a Japanese
government spokesman said excessive exchange rate moves are
undesirable. []
The euro was last up 1.2 percent at $1.4038 <EUR=>. It rose
1.3 percent to 130.48 yen <EURJPY=> after nearing 127 yen on
Wednesday, a two-month low.
Sterling rose 1.7 percent to $1.6335 <GBP=D4> after the
Bank of England did not increase purchases of financial assets,
quelling market fear about a possible rise in UK inflation.
[]
U.S. JOBS, EARNINGS
Data showing the largest drop in initial U.S. jobless
claims since December renewed some appetite for risk, though
continued claims rose to a record. []
But from here, "a lot will depend on forthcoming earnings
reports and how the equity markets respond," Watt said.
Strategists at CitiFX warned against chasing the euro
higher and suggesting selling it at $1.4055 in anticipation of
an eventual move back to $1.3318, its 200-day moving average
against the dollar.
Among other currencies seen as higher risk, the Australian
dollar rose 0.7 percent to $0.7848 <AUD=>, though analysts said
the currency is highly sensitive to concerns about Australia's
ties with top trading partner China.
China confirmed on Thursday the arrest of an Australian
mining executive and three others on spying allegations in a
case that has raised questions about China-Australia relations.
[].
U.S. traders said volatility in the Swiss franc around the
same time as the U.S. data release was sparked by market talk
that Swiss National Board member Thomas Jordan had said the
central bank wants to prevent further franc appreciation.
The SNB has intervened in the market in recent months to
weaken the franc, and this would have been the standard comment
on the currency if he had spoken. The SNB declined to comment.
The dollar was down 1.2 percent at 1.0774 Swiss francs <CHF=>.
(Additional reporting by Nick Olivari; Editing by Andrea
Ricci)
