Our website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

Dollar pares gains as US growth contracts for second quarter

by Staff GBAF Publications Ltd
0 comment

By Karen Brettell

NEW YORK (Reuters) – The dollar pared gains on Thursday after data showed that the U.S. economy contracted again in the second quarter, fueling speculation that the Federal Reserve will not raise rates as high as previously expected.

Gross domestic product fell at a 0.9% annualized rate last quarter, the Commerce Department said in its advance estimate of GDP on Thursday. Economists polled by Reuters had forecast GDP rebounding at a 0.5% rate.

The second straight quarterly decline in GDP meets the standard definition of a recession. It comes as the Fed aggressively hikes rates in an attempt to choke off soaring inflation.

“For now the market is running with the idea that slowing growth will cause the Fed to blink and that we’re entering a recession,”” said Mazen Issa, senior FX strategist at TD Securities in New York.

However, “the challenge here is that in order to get a weak dollar you need a strong euro and that is not going to happen given the headwinds facing Europe.”

The greenback had dipped on Wednesday after the U.S. central bank raised interest rates by 75 basis points, as was widely anticipated, while comments from Fed Chair Jerome Powell spurred hopes for a slower hiking path.

It bounced back earlier on Thursday, however, as investors continued to digest Powell’s comments.

“Yesterday’s long-squeeze is not a sign of a longer-lasting soft period for the dollar, in our view. Upside risks for the greenback remain material due to an unstable global risk environment and still broadly supportive Fed stance,” ING FX strategists Francesco Pesole and Frantisek Taborsky said in a note on Thursday.

The dollar index against a basket of major currencies was last at 106.45, up 0.09% on the day, after earlier reaching 106.98. It has fallen from 109.29 on July 14, which was the highest since September 2002.

The dollar dropped sharply against the Japanese currency to 134.57 yen, down 1.51% on the day, as traders pared back how high the Fed will ultimately hike rates.

“Essentially dollar/yen is a reflection of the Fed terminal rate and that is being revised lower by markets at the moment,” said TD’s Issa.

Fed funds futures traders are now pricing for the Fed’s benchmark rate to peak at 3.24% in December, compared with previous expectations of a top of 3.39% in February, which was priced in on Monday.

The euro fell 0.37% to $1.0161 It traded as low as $0.9952 on July 14, the weakest since December 2002.

The single currency has been hurt by concerns about the region’s energy crisis.

“Problems for other currencies just keep on growing, most notably in Europe, where rising fears over gas and energy shortages are continuing to weigh on the euro and threatening the ability of the (European Central Bank) to tighten policy as much as it might otherwise wish to do so,” said Stuart Cole, chief macro strategist at Equiti Capital in London.

========================================================

Currency bid prices at 9:32AM (1332 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 106.4500 106.3600 +0.09% 11.276% +106.9800 +106.0500

Euro/Dollar $1.0161 $1.0199 -0.37% -10.62% +$1.0234 +$1.0114

Dollar/Yen 134.5650 136.6100 -1.51% +16.88% +136.5700 +134.3500

Euro/Yen 136.74 139.26 -1.81% +4.94% +139.3300 +136.6600

Dollar/Swiss 0.9568 0.9596 -0.29% +4.90% +0.9631 +0.9561

Sterling/Dollar $1.2150 $1.2158 -0.03% -10.13% +$1.2191 +$1.2105

Dollar/Canadian 1.2818 1.2824 -0.08% +1.35% +1.2839 +1.2795

Aussie/Dollar $0.6989 $0.6994 -0.06% -3.84% +$0.7013 +$0.6962

Euro/Swiss 0.9723 0.9786 -0.64% -6.23% +0.9805 +0.9720

Euro/Sterling 0.8360 0.8390 -0.36% -0.48% +0.8403 +0.8346

NZ $0.6284 $0.6261 +0.42% -8.15% +$0.6292 +$0.6252

Dollar/Dollar

Dollar/Norway 9.7430 9.7335 +0.14% +10.65% +9.7795 +9.6830

Euro/Norway 9.9053 9.9353 -0.30% -1.06% +9.9661 +9.8718

Dollar/Sweden 10.2784 10.2070 +0.22% +13.98% +10.3289 +10.1937

Euro/Sweden 10.4458 10.4224 +0.22% +2.07% +10.4585 +10.4135

 

(Additional reporting by Saikat Chatterjee in London; Editing by Alison Williams)