U.S. stocks retreated as investors worried that the auto industry bailout proposal couldn't pass the Senate vote. The deal was approved by the House late Wednesday, but it was challenged by Republicans who held strong in opposition to the bailout.
The Senate Republican leader Mitch McConnell said on Thursday that the proposal "isn't tough enough" and it would not ensure the long-term viability of the Big Three automakers.
Bankruptcy of the auto giants could give a substantial blow to the U.S. labor market that was already suffering from high unemployment rates. The number of U.S. workers filing new claims for jobless benefits surged to a 26-year high last week, the Labor Department reported on Thursday.
The euro was also boosted by comments from European economic officials. The European Central Bank (ECB) should be wary about cutting interest rates too low, ECB council member Axel Weber was quoted as saying on Thursday.
ECB Executive Board member Juergen Stark said on Wednesday that any further interest cuts may be small as the room to lower rates is very limited after the bank reduced the benchmark the most in its history last week.
The euro bought 1.3317 dollars in late New York trading compared with 1.3014 dollars it bought late Wednesday. The pound rose to 1.4978 dollars from 1.4776 dollars.
The dollar fell to 1.2345 Canadian dollars from 1.2610 Canadian dollars, and fell to 91.76 Japanese yen from 92.64 Japanese yen. It fell to 1.1869 Swiss francs from 1.1977 Swiss francs.
