FOREX-Dollar extends losses after weak US GDP
yahoo.reuters.com
Fri Oct 27, 2006 9:42 AM ET
(Updates prices, adds data, quote)
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 27 (Reuters) - The dollar dropped to a one-month low against the yen and three-week trough against the euro on Friday after data showing U.S. gross domestic product was much weaker than expected, reinforcing the view U.S. interest rates would not rise any time soon.
U.S. GDP rose 1.6 percent in the third quarter, the slowest increase in three years, according to the Commerce Department's first estimate of the data. Markets were expecting GDP growth of 2.2 percent. The core personal consumption expenditures price index, a key inflation measure, showed prices rose at a slower pace than in the previous quarter.
"It points to a significant slowdown, but the market was short dollars going into it, as there was some speculation we'd get a soft number," said Shaun Osborne, chief currency strategist at TD Securities in Toronto.
"To a large degree, the market was prepared, but 1.6 percent is still pretty soft."
Mid-morning in New York, the euro rose to a fresh three week-high against the dollar at around $1.2750, though it later slipped back to $1.2735, up 0.4 percent from late Thursday.
The dollar dropped to a one-month low of 117.17 yen, though it regained a little ground later. Traders said markets took out key option barriers at 118 yen and tripped stops at 117.95-90.
The market was positioned heavily against the yen after softer-than-expected Japanese CPI data overnight, and the U.S. GDP data sparked some unwinding of those positions, said John McCarthy, vice president of foreign exchange at ING Capital Markets in New York.
The GDP report, "while backward-looking, caught people by surprise, and that's prompted good dollar selling," he said.
Next up is the final number of the University of Michigan consumer confidence index for October. A Reuters poll showed a forecast of 92.5 from the 85.4 the previous month. |
