Thursday August 28, 2008 - 22:27:30 GMT
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Reuters - www.reuters.com
FOREX NEWS-US dollar edges up, cheered by growth data, stocks
* U.S. Q2 GDP data stronger than previously reported
* Higher stocks, falling oil help boost dollar
* Sterling down after data shows fall in UK house prices
(Recasts, updates prices, adds comment, byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 28 (Reuters) - The dollar inched up against
the euro and scaled a 2-year peak versus sterling on Thursday,
buoyed by data showing a resilient U.S. economy growing at a
faster pace in the second quarter than first reported.
A rally in U.S. stocks, led by industrial and financial
companies and a decline in oil prices also boosted the
greenback, analysts said, trimming losses versus the yen and
lifting the dollar against a basket of six currencies.
"Today's U.S. GDP numbers, although they're old, suggest
that the positive momentum is carrying over and that has helped
the dollar," said Win Thin, senior currency strategist at Brown
Brothers Harriman in New York. "This is a far cry from the
recession we were worried about a few months ago."
According to Thursday's report, the economy, as measured by
gross domestic produce, grew at a 3.3 percent annual rate in
the second quarter compared with the initial estimate of 1.9
percent, bolstered by consumer spending and exports.
The report prompted investors to buy back the dollar, with
bids accelerating broadly as U.S. stocks climbed and oil prices
plummeted midway through the New York session.
"Oil prices remained very important and they have been
highly correlated with the dollar. So oil prices coming off
intraday highs and stocks gaining have clearly helped the
dollar," said Vassili Serebriakov, a currency strategist at
Wells Fargo in New York.
In late afternoon trading, the euro <EUR=> was down 0.1
percent on the day at $1.4702, well off the session peak at
Though the euro surrendered gains against the dollar, it
remained off the six-month low touched this week due to reduced
expectations the European Central Bank will cut interest
The dollar index .DXY was up 0.1 percent at 77.131, not
far from the 2008 high of 77.619 seen this week.
Against the yen, the dollar was last at 109.46 yen <JPY=>,
little changed on the day but well above the session low of
U.S. DOUBTERS REMAIN
Still, despite the dollar benefiting since late July from
growing signs that economic weakness has spread beyond the
United States, doubts remain about the ability of mortgage
finance giants Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) to
raise enough capital to sustain themselves in a troubled U.S.
Analysts said this could hurt the dollar down the road.
Some analysts were also not too enthused with the strong
U.S. GDP number and most have looked past the second-quarter
data to expect weakness later in the year.
"Final sales look likely to be very soft in Q3 thanks to
very weak consumer spending as the tax rebates wear thin,
though inventory acceleration should again secure a solid
positive GDP number," said Alan Ruskin, chief international
strategist at RBS Global Banking and Markets in Greenwich,
"The point of maximum vulnerability for U.S. GDP looks to
be Q4, when inventories build is minimal, the positive trade
impact deteriorates as global growth slows, (and) the lagged
slowing in business investment and structures is more evident
...," he added.
That contrasts with sentiment around the euro after ECB
governing board member Axel Weber said on Wednesday that talk
about lower rates was premature, prompting traders to rethink
their bets on euro zone rates. The reverberations of these
remarks were still felt on Thursday.
In other currencies, sterling was down 0.3 percent against
the dollar at $1.8293 <GBP=> after briefly touching a new
two-year low at $1.8242, while the euro was up 0.2 percent
against sterling at 80.35 pence <EURGBP=>.
The pound fell after a measure of British house prices
showed the biggest annual price fall for 17 years while retail
sales posted the steepest drop since records began a quarter of
a century ago, indicating an increasingly fragile economy.
(Additional reporting by Nick Olivari; Editing by James
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