Dollar slides sharply as GDP decline moderates
NEW YORK — The dollar closed the week out lower as a report showed the decline in U.S. economic output was vastly improved in the second quarter.
Bad signals from economic reports and poor earnings tend to help the dollar as investors seek safety, often in U.S. government debt; good news and stronger equities usually correspond with a drop in the greenback’s value.
The 16-nation euro leapt to $1.4250 late Friday from $1.4078 on Thursday, while the British pound jumped to $1.6686 from $1.6489.
The dollar dropped to 94.79 Japanese yen from 95.60 yen.
In the past month, better-than-expected corporate earnings and positive signals from economic reports have rallied demand for stocks, emerging-market assets and other investments deemed “riskier” than the dollar.
The dollar was also down 1.1 percent and 0.9 percent against the New Zealand and Australian dollars, respectively, whose interest rates are higher than those of most major economies and are drawing in investors as confidence in a global recovery improves.
Emerging-market currencies such as the Brazilian real and Polish zloty also gained.
On Friday, the government said that gross domestic product fell at an annual pace of 1 percent in the second quarter. That’s a big improvement over the 6.4 percent contraction in the first three months of the year.
The decline moderated as businesses scaled back spending cuts and the government pumped money into the economy.
The International Monetary Fund, in a report on the U.S. economy released Friday, also said the dollar was “moderately overvalued” at the end of June.
An index measuring the greenback against a basket of currencies that includes the euro and the yen has dropped more than 2 percent since then.
The dollar also was steeply lower against the Swiss franc, dropping to 1.0689 late Friday from 1.0880. The buck slid to 1.0789 Canadian dollars from 1.0830 late Thursday.
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