By Saumya Vaishampayan, MarketWatch

NEW YORK (MarketWatch) -- The dollar fell against the euro Thursday as investors weighed the prospects of additional stimulus from the European Central Bank with guesses on when the Federal Reserve could begin raising rates.

Jobless claims edged up by 2,000 to 304,000 in the week ended April 12, remaining near their lowest level since 2007. Economists had expected claims to hit 315,000, according to a MarketWatch survey.

Manufacturing in the Philadelphia area picked up in April, with the Philly Fed diffusion index rising to 16.6 from 9.0 in March. The 16.6 reading was the highest since September and beat expectations.

Federal Reserve Chairwoman Janet Yellen on Wednesday said a strong U.S. economy that meets the Fed's employment and inflation goals could be achieved by the end of 2016, showing "how far we have to go" before the recovery takes root. Recap: Live blog and video of Janet Yellen's speech and Q&A

The euro (EURUSD) rose to $1.3838 from $1.3815 late Wednesday. Producer prices in Germany fell 0.9% in March from a year earlier, notching a bigger decline than had been expected and the latest data report to highlight the weak level of inflation in the euro zone. Continued levels of low inflation could threaten the European Central Bank's medium-term inflation outlook and has led to speculation that the ECB could be forced to ease further.

The euro hasn't fallen significantly against the dollar despite comments from ECB officials about how the high exchange rate has further depressed inflation. The euro hit a 2014 high above $1.39 in March, marking the highest level since late 2011, according to FactSet. And continued dovish rhetoric from Yellen has weighed on the dollar, said Kathleen Brooks, research director at Forex.com, in a note.

The ICE dollar index (DXY), which pits the dollar against six rivals, has fallen nearly 6% since its peak in July, even as the Fed began reducing its monetary stimulus, she said. In recent trade, the index fell to 72.711 from 79.827 late Wednesday.

"If EURUSD continues to hover around 1.40 and the Fed sticks to its current message then the ECB may have to unleash the big guns in the form of negative deposit rates, or QE, to weaken the EUR once and for all," Brooks said in a note. "Ultimately, it could be the Fed, rather than weak inflation, that may force the ECB to embark on radical policy measures in the near term," she added.

The WSJ Dollar Index , an alternative gauge that measures the dollar against more rivals, moved lower to 72.90 from 72.98.

The dollar (USDJPY) fell to Yen102.15 from Yen102.24 late Wednesday. Japan downgraded its view on the economy on Thursday, spurred by a decline in consumer spending that was visible after the sale-tax hike went into effect April 1.

In other trade, the Australian dollar (AUDUSD) fell to 93.45 U.S. cents from 93.71 U.S. cents late Wednesday. The British pound (GBPUSD) edged up to $1.6809 from $1.6797.

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