By Hannah Lang and Harry Robertson
NEW YORK/LONDON (Reuters) – The dollar fell on Thursday after revised data showed gross domestic product – the broadest measure of economic activity – grew at a slower pace than previously expected in the first quarter, as the currency rose to two. weekly high the day before.
The Commerce Department reported that the US economy grew at an annual rate of 1.3% from January to March, down from the prior estimate of 1.6% after downward revisions to consumer spending.
The slowdown in growth in the first quarter followed recent softness in retail sales readings and equipment spending, which had helped ease bets on the Federal Reserve cutting interest rates.
“This is definitely something the Fed was looking for. All of these numbers are below expectations … it’s taking some heat off the Fed,” said Helen Given, FX trader at Monex USA.
A two-day jump of 15 basis points above 4.6% in long-term Treasury yields helped boost the dollar on Wednesday by increasing the appeal of US debt.
The index that tracks the U.S. currency against its major peers rose to 105.18 overnight, its highest since May 14, but was last down 0.33% at 104.78.
The dollar was down 0.57% against the Japanese yen at 156.755, after hitting a one-month high of 157.72 a day earlier.
Charu Chanana, head of FX strategy at Saxo Bank, said traders may be nervous about approaching the 158 level with the threat of intervention from Japanese authorities looming in the background.
Market players suspect that Japan intervened to support its currency in late April and early May, which could be confirmed by data released on Friday.
“The Japanese authorities intervened near this level on May 1 and the market now sees 158 as a critical point for possible intervention,” Chanana said.
The euro rose 0.29% to $1.083 after falling 0.5% on Wednesday to hit a two-week low of $1.0789 overnight. Sterling rose 0.18% to $1.2724 after also falling 0.5% on Wednesday.
Expectations for a Fed rate cut this year have diminished amid signs of rising inflation, most recently with a surprise boost in consumer sentiment in data on Tuesday.
Markets are now looking ahead to the release of the Personal Consumption Expenditure price index – the Fed’s preferred measure of inflation – on Friday for further indications of how the central bank may proceed later this year.
Eurozone price data is also out on Friday, following a stronger-than-expected April inflation reading for Germany on Wednesday.
In cryptocurrencies, bitcoin recently rose 1.88% to $68,673.
(Reporting by Hannah Lang in New York and Harry Robertson in London; Additional reporting by Kevin Buckland in Tokyo; Editing by David Holmes, Sriraj Kalluvila and David Evans)
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