Forex - Dollar gains on solid U.S. factory data, falling jobless claims

The dollar firmed against most major currencies on Thursday after data released earlier revealed that jobless claims are on the decline in the U.S., while factory output is on the rise in the world's largest economy.

Solid indicators in the U.S. often strengthen the greenback by fueling expectations that the Federal Reserve is moving closer to tapering and eventually ending monetary stimulus programs such as monthly asset purchases that weaken the dollar to spur recovery.

In U.S. trading on Thursday, EUR/USD was down 0.74% at 1.3203.

In the U.S. earlier, the Institute for Supply Management said its widely-watched purchasing managers index rose to 55.4 in July from 50.9 in June, expanding at its fastest rate since April 2011 and well above market forecasts for a 52.0 reading. 

The numbers strengthened the greenback by building expectations that the Federal Reserve remains on track to winding down stimulus measures such as its USD85 billion-a-month bond-buying program, which weakens the greenback to speed up recovery.

Better-than-expected data out of the labor market also fueled ongoing sentiments that extraordinary monetary stimulus programs will begin to wind down possibly this year and end in 2014.

The Department of Labor said the number of individuals filing for initial jobless benefits in the week ending July 26 fell by 19,000 to 326,000. 

Analysts were expecting jobless claims to come in at 345,000. 

Meanwhile, the euro came under pressure after ECB President Mario Draghi said that the central bank’s monetary policy will remain accommodative "for an extended period of time."

The ECB held its benchmark interest rate at a record low 0.50% in August, in line with expectations. 

Elsewhere in Europe, London-based Markit said the euro zone's manufacturing PMI rose to 50.3 in July, from a reading of 50.1 the previous month. Analysts had expected the index to remain unchanged last month.  

The greenback, meanwhile, was up against the pound, with GBP/USDtrading down 0.58% at 1.5120.

The Bank of England earlier left interest rates unchanged at a record low 0.5% and left the size of its asset-purchasing program unchanged at GBP375 billion.

The dollar was up against the yen, with USD/JPY up 1.71% at 99.57, and up against the Swiss franc, with USD/CHF trading up 1.11% at 0.9364.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.71% at 1.0350, AUD/USD down 0.70% at 0.8922 and NZD/USD trading down 1.43% at 0.7872.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.87% at 82.46.

On Friday, the Bureau of Labor Statistics will release its July jobs report, a major indicator of U.S. recovery.