2021.01.2820:43:00UTC+00Dollar Retreats After Early Gains

After exhibiting strength early on in the session thanks to fairly strong economic data, the U.S. dollar retreated and pared gains on Thursday as a rally in stock market dimmed the currency's appeal a bit.

Data from the Labor Department showed initial jobless claims fell to 847,000 in the week ended January 23rd, a decrease of 67,000 from the previous week's revised level of 914,000.

Economists had expected jobless claims to drop to 875,000 from the 900,000 originally reported for the previous week.

A report from the Commerce Department said real gross domestic product jumped by 4% in the fourth quarter after skyrocketing by 33.4% in the third quarter.

Despite the rebound in the second half of the year, GDP for 2020 contracted by 3.5% following the 2.2% growth seen in 2019.

A separate report from the Commerce Department showed new home sales in the U.S. rebounded in the month of December after falling for four consecutive months.

The dollar index, which was up around 90.80 earlier in the day, dropped to 90.41 later on and was last seen at 90.52, down 0.14% from previous close.

Against the Euro, the dollar was down slightly at 1.2120, easing from around 1.2090 a unit of the European currency. Survey results from the European Commission showed Eurozone economic sentiment weakened in January driven by sliding confidence in retail trade and services as Covid-19 containment measures remain in place.

The economic sentiment index fell less-than-expected to 91.5 from 92.4 in the previous month. The expected level was 89.5. The industrial confidence index rose unexpectedly to -5.9 from -6.8 a month ago. The reading was seen falling to -7.2.

The Pound Sterling was stronger, fetching $1.3728 a unit, nearly 0.3% more than Wednesday's close.

The Yen weakened to 104.47 a dollar before regaining some lost ground. At 104.25, the Japanese currency was down 0.15% a little while ago.

Against the Aussie, the dollar was weaker by about 0.25% with the pair trading at 0.7683. The Loonie was up marginally at C$1.2810 a dollar.

The Swiss franc was little changed at 0.8886. Data from the Federal Customs Administration showed Switzerland's exports declined 6.4% month-on-month in December, after a 5.6% growth in November. Imports declined 6.7% monthly in December, after a 4.7% rise in the previous month.

On Wednesday, the Federal Reserve offered a downbeat assessment of the economy, saying that the virus crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.

The economy was still a long way from a complete recovery, Powell said, adding that it is too early to talk about tapering the Fed's asset purchase program.