Dollar hit as euro gets lift from growth data

NEW YORK - The dollar slumped while the euro sprang higher Thursday after data showing Germany and France emerged from recession in the second quarter, and US data showing ongoing weakness.

By (AFP)

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Published: Fri 14 Aug 2009, 5:45 AM

Last updated: Thu 2 Apr 2015, 8:29 AM

The euro rose to 1.4287 dollars at 2100 GMT from 1.4191 dollars in New York late on Wednesday. The euro was as high as 1.4327 dollars during the session.

Against the Japanese unit, the dollar fell to 95.36 yen from 96.09 yen late Wednesday.

The 16-nation eurozone economy shrank just 0.1 percent in the second quarter, bouncing back strongly from a contraction of 2.5 percent in the three months to March.

The gains were led by Germany and France, the region’s two biggest economies, which each posted surprise growth of 0.3 percent in the three months to June to emerge from the worst recession in decades.

That news contrasted with weaker-than-expected US data.

US retail sales unexpectedly dipped 0.1 percent in July, highlighting ongoing consumer weakness.

A separate report showed mew US jobless claims rose by 4,000 in the past week to 558,000, in a weaker-than-expected snapshot of current labor conditions.

“General weakness from the US data releases this morning, highlighted by the unimpressive retail sales, have seemingly set the tone for the day,” said Joel Kruger at Forex Capital Markets.

“Fundamentals appeared to weigh on the greenback,” said Michael Woolfolk at Bank of New York Mellon.

Woolfolk said the market quickly forgot Wednesday’s statement from the US Federal Open Market Committee suggesting the US economy was “leveling out,” which had sparked optimism about recovery from the deep recession.

“The feel-good effect of yesterday’s FOMC statement was quickly erased by an unambiguously negative retail sales report this morning,” he said.

While welcoming the news in Europe, analysts also cautioned that the recovery will likely be protracted and could be vulnerable as massive government stimulus packages run their course and rising unemployment remains a worry.

“With output unlikely to return to pre-recession levels in the medium term, unemployment may become a serious drag ... Additionally, the contrasting economic performances among the euro member states are likely to cause headaches for the European Central Bank,” said Jorg Radeke, economist at the Centre for Economic and Business Research.

In late New York trade, the dollar stood at 1.0697 Swiss francs from 1.0771 Wednesday.

The pound was unchanged at 1.6583 dollars.

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