NEW YORK?The dollar fell against most leading currencies on Thursday as grim economic data dampened hopes of US recovery.

The European single currency fell back to $1.2821 in New York at 2100 GMT from $1.2852 late Wednesday.

The greenback also dropped against the Japanese currency to 85.38 yen from 85.44 yen the previous day.

It recovered from a sharp drop earlier to 84.90 yen, near its 15-year low.

"The dollar had a rocky session after more disappointing data... Which caused some concern that broader manufacturing figures could cross back into contractionary territory," said UBS analyst Brian Kim.

Wall Street shares dropped into negative territory Thursday, ending a two-day rally, as official data showed that the number of Americans filing new weekly claims for jobless benefits jumped unexpectedly to 500,000, the highest level in nine months.

US unemployment claims in the week to August 14 increased by 12,000 from the previous week's revised figure of 488,000 -- and came well above most economists' expectations of 475,000.

It was the third straight week in which claims have risen, and underscores the threat posed by unemployment on the recovery from the worst US recession in decades.

More disappointing data came in when the Federal Reserve of Philadelphia said manufacturing activity in the mid-Atlantic region has dropped during August.

"The market is overwhelmed with the fear that we?ll fall into a double dip," said analyst Peter Cardillo of Avalon Partners.

The glum figures pile on top of a slew of negative reports in recent weeks showing that the pace of the recovery has slowed.

Against other key currencies, the dollar fell to 1.0317 Swiss francs from 1.0421 while the British pound slightly rose to $1.5597 from $1.5595.