2011.09.1514:06:00UTC+00Dollar Tumbles Versus Euro After Central Banks Boost Liquidity

The dollar fell sharply for a fourth day versus the broadly stronger euro, as the European Central Bank took new steps to provide liquidity for the region's struggling banks.

Concerns that Europe lacks the political will to backstop Greece and Italy were put on the back-burner this week, as French and German leaders pledged support for their debt-ridden neighbors.

Stocks rallied around the world, but the currency markets reflected disappointment in a slew of economic figures from the U.S.

The dollar tumbled to $1.3915 versus the euro, falling further from this weekend's 7-month peak of $1.3494.

The ECB announced it will conduct three new dollar liquidity operations in cooperation with the Federal Reserve, Bank of Japan, and Bank of England.

New operations will be fixed rate reps with full allotment at 3-month maturities.

Attention will be focused on headlines from Poland on Friday, as U.S. Treasury secretary Timothy Geithner meets with financial ministers from Europe to discuss the region's sovereign debt and banking problems.

The dollar eased to $1.5860 versus sterling before settling near $1.58.

U.S. inflation figures helped the dollar rally briefly versus the yen, but the buck was back to its early lows within an hour. The buck was stuck near Y76.70, near a record low Y75.93 set in August.

With prices at the pump remaining stubbornly high, U.S. consumer price inflation picked up in August at a faster pace than economists were expecting.

The consumer price index rose 0.4 percent in August, according to figures released Thursday by the Labor Department. Most economists had predicted a 0.2 percent increase, following a 0.5 percent monthly increase in July.

New unemployment claims in the U.S. rose more than expected last week, according to figures released Thursday by the Department of Labor.

On a seasonally adjusted basis, new unemployment claims came in at 428,000 for the week ending Sept. 10. This was 11,000 higher than the previous week's revised figure of 417,000.

Manufacturing activity in the mid-Atlantic region continued to decline in September, according to new statistics released on Thursday. The rate of contraction slowed from the previous month, though the moderation was not as pronounced as economists had predicted.