Friday, 29 August 2014

Dollar boosted by U.S. GDP report; euro sags on Ukraine


Packs of U.S. one hundred dollar bills are counted at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking


The dollar got a modest lift on Thursday from better-than-expected U.S. economic data and a worsening of the Ukraine crisis that weighed on the steadily declining euro.

Other safe-haven currencies also rose as Ukrainian President Petro Poroshenko said Russian forces had entered his country and the military conflict was intensifying after Russian-backed separatists swept into a key town in eastern Ukraine.

"It's an invasion in all but name," said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York. "The situation now is lurching in a more worrisome direction."

The dollar index, which jumped in early U.S. trading after the U.S. government reported the American economy grew at an upwardly revised 4.2 percent during the second quarter, was last up 0.10 percent at 82.499.

The value of the dollar versus the basket of six major currencies has this week repeatedly set new 2014 highs amid a greenback rally that began in early July.

“The basic story is still in place of a solid rebound (in the economy) in the second quarter after a depressed first quarter," said Doug Handler, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. "These numbers will not change the Fed’s outlook."

The Commerce Department had initially estimated that U.S. gross domestic product expanded at a 4.0 percent annual rate in April, May and June. The 4.2 percent rate reflected upward revisions to business spending and exports and was the fastest pace since the third quarter of 2013.

A separate, Labor Department report showed the number of Americans filing new applications for jobless benefits slipped 1,000 to a seasonally adjusted 298,000 last week. It marked a second week of consecutive declines and underscored brightening labour market fundamentals.

Safe-haven currencies, the yen and the Swiss franc, rose in global currency markets. The dollar was last down about 0.1 percent against the yen at 103.70 yen and flat against the franc after hitting a low of 0.9127 francs.

The euro hit a 21-month low against the Swiss franc of 1.2052 francs per euro on trading platform EBS after the news from Ukraine and was last off 0.1 percent at 1.2061 francs.

Against the yen, the single currency fell to a two-week low of 136.41 yen per euro and was last at 136.72, down for the day by 0.2 percent. The euro was trading at $1.3179, down about 0.1 percent.

Selling of the euro, which traded at nearly $1.40 in May, has been driven over the last week by stepped-up speculation that European policymakers will quicken monetary loosening as a way to boost economic growth.

But on Thursday euro selling accelerated after Ukraine accused Russia of moving troops across its border.

Reference: Michael Connor  Reuters

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