Dollar Falls Amid Fears Over Inflation, Job Losses

The dollar fell sharply against the euro and other major currencies Thursday amid tougher talk on inflation from the European Central Bank and in anticipation of U.S. data expected to show big job losses after hurricanes Katrina and Rita.

The European currency bought $1.215 in late New York trading, up from $1.195 on Wednesday and its biggest rise against the dollar since January 2004.

The dollar also fell against the Japanese yen, edging down to 113.36 yen from 113.93 yen.

The weakening came amid pessimism about U.S. jobs data to be released today.

Some economists have predicted a net job loss of 129,000 to more than 170,000 in September in the wake of the hurricanes.

In a foreshadowing of that, the Labor Department reported Thursday that 74,000 hurricane-related claims for jobless benefits were filed last week -- bringing the total so far to 363,000.

In Athens, meanwhile, the European Central Bank left interest rates for the 12-nation euro zone unchanged but sounded a tough tone on the risks of inflation.

Bank President Jean-Claude Trichet cautioned that “strong vigilance” was needed to watch rising costs -- a step up from his previous talk of “vigilance.”

“The ECB has upped the ante in terms of hawkish comments, and that’s been the catalyst for the euro to move higher,” said Kamal Sharma, a currency strategist at Bank of America Corp. in London. “This all brings forward the chances of rate increases next year.”

Higher interest rates can be used to combat inflation. They also boost the appeal of assets denominated in a country’s currency.