Friday June 26, 12:22 PM
Dollar drops against rival currencies
LONDON (AFP) - The dollar dipped Friday against the euro and the yen on better-than-expected US GDP numbers that encouraged investors to switch away from the safe-haven greenback, analysts said.
In late morning London trade, the European single currency rose to 1.4051 dollars from 1.3986 dollars in New York late on Thursday.
Against the Japanese currency, the dollar eased to 95.90 yen from 95.95 yen on Thursday.
"The dollar weakened across the markets as US GDP data came in better than expected," said CurrenciesDirect analyst Phil McHugh.
The US economy shrank at a 5.5 percent pace in the first quarter, the government had said Thursday in a report offering a glimmer of hope for recovery from prolonged recession.
The Commerce Department's final estimate of gross domestic product (GDP) was not as bad as last month's estimate of a 5.7 percent annualized decline in output.
It still showed a dramatic decline on the heels of a 6.3 percent slide in the fourth quarter of 2008 -- the worst slump in decades.
"The data raises hopes that the (US) economy has reached a bottom and that second-quarter data will show further improvement in GDP," added McHugh.
Rising global equity and oil markets also encouraged investors to take more risk, dampening demand for the greenback which is widely regarded as a safe bet in times of volatile financial markets.
"Gains in stock markets and crude oil prices caused risk appetite to revive among investors, which lifted higher-yielding currencies" such as the euro, Yuzo Sakai, a forex manager at Tokyo Forex and Ueda Harlow, told Dow Jones Newswires.
The yen gave back some of its early gains against the dollar as traders mulled news that Japanese consumer prices logged a record fall last month.
Analysts said the prospect of another prolonged bout of deflation in the world's second largest economy increased the chances of Japanese interest rates remaining low for some time, potentially reducing the appeal of the yen.
In London trade on Friday, the euro was changing hands at 1.4051 dollars against 1.3986 dollars late on Thursday, 134.52 yen (134.22), 0.8531 pounds (0.8546) and 1.5297 Swiss francs (1.5301).
The dollar stood at 95.90 yen (95.95) and 1.0905 Swiss francs (1.0937).
The pound was at 1.6442 dollars (1.6368).
On the London Bullion Market, the price of gold climbed to 944.60 dollars an ounce from 937.25 dollars an ounce late on Thursday.
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