* Dollar up on U.S. jobless claims, Fed minutes
* Pound hovers within sight of 3-1/2 year high vs euro
* UK safe haven status may be threatened by euro debt crisis
By Michael Szabo
LONDON, July 12 Sterling slipped to a five-week
low against a broadly stronger dollar on Thursday after U.S.
jobless claims fell to their lowest in four years and Federal
Reserve minutes dampened expectations of further monetary easing
in the near future.
The pound dropped 0.6 percent to as low as $1.5393
- a level not seen since June 6 - after the U.S. jobs data
showed initial claims for state unemployment benefits fell more
than economists had expected.
Sterling was down slightly against the euro at
79.04 pence, off a 3-1/2 year high of 78.71 pence touched on
Wednesday, despite the euro extending losses against the dollar
and Japanese yen.
"Sterling's playing the usual middle man role. It does seem
as though euro/sterling is trying to find a bottom, but for the
most part sterling is taking its cue from euro/dollar," said
Daragh Maher, currency strategist at HSBC.
Investors sold perceived riskier currencies against the
dollar after the release of June minutes from the Federal
Reserve, which suggested growth in the world's largest economy
would have to worsen for the central bank to launch more
Asset buying from the Fed tends to weigh on the greenback
against other currencies as it increases the supply of dollars
in the system.
The euro also softened across the board as investors
continued to fret about Europe's progress in addressing the
region's debt crisis.
Sterling has benefited in recent months from being seen as a
safe haven alternative to the euro zone's fiscal turmoil,
although some market players said the gloomy outlook for the UK
economy could limit the pound's gains.
"The prognosis for the UK is not a very good one, and only
thing saving the pound so far is it's not the euro," said Alan
Wilde, director of fixed income and currency at Baring Asset
HSBC's Maher also said the UK risked losing its safe haven
appeal, given the euro zone is the country's largest trading
partner and a deteriorating sentiment on the continent would
affect the domestic economy.
"The UK is not the most ugly of them all, but the danger is
that to be a safe haven from another problem, you should be
rather unaffected by it," he said.
"Under extreme scenarios, the UK economy and financial
sector will be very badly affected (by the euro zone debt
crisis), so that might be creating caution and maybe people
aren't as confident that sterling is necessarily the haven from
The Japanese yen surged by over 1 percent against the pound
, trading up to a one-month high of 122.07 yen after
the Bank of Japan refrained from announcing more easing but
tweaked its asset buying and lending programme.
(Reporting by Michael Szabo. Editing by Jeremy Gaunt.)