NEW YORK (AP) - Rising bond yields Thursday dashed expectations for an interest rate cut, sending the dollar higher against other major currencies.
The 13-nation euro dropped to $1.3432 in late New York trading from $1.3506 late Wednesday. The euro was down after the European Central Bank on Wednesday raised its benchmark interest rate to 4 percent but sent moderate signals on its future course.
The British pound sank to $1.9771 from $1.9928 after the Bank of England on Thursday held its key interest rate steady at 5.5 percent.
The dollar strengthened to 121.11 Japanese yen from 121.01 yen.
The yield on the U.S. Treasury's 10-year note passed 5 percent Thursday for the first time since August. A continued climb, as bond prices weaken, could drive up rates on home mortgages.
If the yield reaches 5.25 percent, a five-year high, it would match the Federal Reserve's current benchmark interest rate -- indicating that the market is effectively ahead of the central bank in raising rates to curb inflation.
Higher interest rates can bolster a currency by making investments denominated in it more attractive.
Boosting the dollar earlier Thursday were signs that the U.S. economy is improving and boosting job prospects.
A Labor Department report showed the number of Americans filing claims for jobless benefits totaled 309,000 last week, 1,000 fewer than the previous week.
The small improvement pushed claims down to the lowest level in three weeks.
Retail sales figures for May came in mixed, better than April's poor showing but possibly indicating a slowing spending trend.
In other trading, the dollar bought 1.0620 Canadian dollars, up from 1.0588, and 1.2248 Swiss francs, rising from 1.2163.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.