The U.S. dollar dropped against most major currencies this week as concerns over debt problems in the eurozone and the United States intensified and added to investors' fears.

Investment bank Morgan Stanley Thursday cut its forecast for global growth, saying the debt problems in both the United States and the eurozone were the major threats.

U.S. economic reports due out this week heightened economic concerns. The U.S. Labor Department said initial jobless claims last week rose 9,000 to 408,000, showing the job market was still weak.

The government agency also reported that the consumer price index, which measures the rate of inflation at the retail level, increased 0.3 percent in July, the largest gain since March, suggesting that the risk of inflation is mounting.

Moreover, the housing market in the United States is still in bad shape. According to the National Association of Realtors, home sales dropped 3.5 percent in July to 4.67 million. The figure was well below previous estimates of 4.92 million.

Also, the recovery of the manufacturing sector still has a long way to go. The New York Federal Reserve Bank reported Monday that its manufacturing activity index fell to minus 7.7 points in August from minus 3.8 in July, showing that manufacturing activity was still weak.

Economic worries weighed on the dollar as the dollar index lost 0.5 percent this week.

Meanwhile, U.S. Treasury bonds seemed less attractive to foreign investors. According to the U.S. Treasury Department, foreign investors bought 3.7 billion U.S. dollars of long-term U.S. assets in June, down sharply from 24.2 billion dollars in May, as private foreign investors sold a record amount of Treasury bonds.

The decrease of foreign demand for Treasury bonds also worried investors and added pressure on the dollar.

The situation in the eurozone was equally dire, despite the fact that the European Central Bank (ECB) continued to make efforts to save Italy and Spain.

The ECB revealed Monday that it had spent 22 billion euros last week to buy Italian and Spanish bonds in an effort to lower their lending costs.

On Tuesday, in a meeting to discuss how to strengthen cooperation as regards financial and economic policies in the eurozone, French President Nicolas Sarkozy and German Chancellor Angela Merkel agreed to align their corporate tax rates, create a common economic council and enhance deficit-limit rules in each country.

They also hinted that they don't favor the issuance of bonds backed by the eurozone, as some investors have hoped for. However, the euro didn't manage to bounce back as concerns about the eurozone's economy still weighed on the shared currency.

Against other currencies, the dollar lost 0.1 percent against the Japanese yen as Japan reported better-than-expected economic data. The Japanese government said the country's economy contracted by 1.3 percent in the second quarter, following a 3.6 percent decrease in the first quarter. Yet the drop was less than the 2.7 percent contraction expected by economists.

The Bank of England released the minutes of its latest monetary policy meeting Wednesday. These showed that all nine members of the central bank's Monetary Policy Committee agreed to hold the key lending rate at a record low 0.5 percent,indicating that lifting the economy out of its slump was the central bank's priority. The British pound gained more than 1 percent against the dollar this week.

The Swiss franc continued to slip against the greenback as the Swiss National Bank, the country's central bank, announced additional steps to avoid the Swiss franc's rise. Also, Switzerland's government said it would help alleviate the impact on the economy caused by the currency's rally.

 VietNamNet/Xinhuanet