NEW YORK: The dollar extended losses on Thursday after data showed that US jobless claims rose more than expected in the latest week, though the market was generally viewed as consolidating ahead of key inflation data and the Federal Reserve’s interest rate decision next week.

Initial claims for state unemployment benefits jumped 28,000 to a seasonally adjusted 261,000 for the week ended June 3, the Labor Department said on Thursday. Economists polled by Reuters had forecast 235,000 claims for the latest week.

“Claims (were) a bit higher than expected,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, but “we’re still in a consolidation mode ... right now we’re just trapped.”

The greenback has been bolstered by expectations that the Federal Reserve will hike rates in July, though it is widely expected to pause hikes at the conclusion of its June 13-14 meeting.

But worsening economic data may also limit how many further rate increases the US central bank is able to achieve even if inflation pressures remain high.

“There is a small window of opportunity for the Fed to raise rates again, whether it’s June or July, and the market now favors July ... the market doesn’t think there’s anything more to be done because the economy looks set to weaken,” said Chandler.

The euro was last up 0.57% against the dollar at $1.0759. The single currency gained despite data showing that the euro zone economy was in a technical recession in the first three months of 2023.

The greenback fell 0.70% to 139.15 yen.

The dollar index, which measures the currency against six major peers, was down 0.48% to 103.53. Last week the index hit 104.7, the highest since March 15.