By Caroline Valetkevitch
NEW YORK (Reuters) - The dollar was a tad higher on Thursday after hitting a two-year low earlier in the session and as investors digested mixed data on U.S. jobless claims ahead of Friday's nonfarm payrolls report.
The dollar index, which measures the currency against a basket of currencies, reached a two-year low of 92.495 overnight. It was last trading 0.1% higher on the day at 92.830 <=USD>.
The move came in the wake of a 4% decline for the index in July, its biggest monthly percentage drop in a decade, as investors fled to the euro and other currencies that appeared to be holding up better as countries around the world grappled with the coronavirus pandemic.
The dollar index initially pared gains on Thursday but was mostly choppy following the claims data, which showed fewer Americans sought jobless benefits last week. But it also showed that 31.3 million people were receiving unemployment checks in mid-July, suggesting the U.S. labor market was stalling.
"The market is mostly just consolidating a little bit after this amazing weakness we've had of late," said Axel Merk, president and chief investment officer at Merk Hard Currency Fund in Palo Alto, California.
Investors are keen to see further details on the U.S. employment situation in the Friday's monthly jobs report.
"Upbeat jobs data could help ease pressure on the dollar. But if the data should aggravate concerns about the U.S. economic fragility, it could spell another leg lower for the currency," Joe Manimbo, senior market strategist at WesternUnion Business Solutions, wrote in a note on Thursday.
Investors are also waiting for U.S. lawmakers to agree on a new package of support related to the coronavirus pandemic. Republicans and Democrats on Thursday remained far apart on what to include in another wave of relief, although Senate Majority Leader Mitch McConnell said the U.S. economy needs an "additional boost" to cope.
Analysts worried that programs such as unemployment benefits are covering up underlying damage to the economy.
The euro was up 0.1% at $1.1869 against the dollar after earlier reaching a two-year high of $1.1916 <EUR=EBS>.
In emerging markets, Turkey's lira hit a record low against the euro. Analysts warned of inflation and predicted state attempts to aid the currency would struggle.
"That is a concern because it could have ripple effects elsewhere," Merk said.
The Aussie dollar was last up 0.6% at $0.7237 against the U.S. dollar. <AUD=D3>
Australia's second-biggest city, Melbourne, started a six-week total lockdown on Thursday, following a resurgence of COVID-19 cases.
(Reporting by Caroline Valetkevitch; additional reporting by Elizabeth Howcroft in London; editing by Larry King, David Gregorio and Dan Grebler)