Dollar falls after weak GDP reading

Dollar falls after weak GDP reading

	Published : Thu, 31 May 2007 21:30 By : Agencies Print this Story

NEW YORK (AP) - The dollar weakened against the euro and British pound Thursday after new reports showed the U.S. economy nearly stalled during the first quarter, a shock that was offset by a drop in the number claiming unemployment benefits.

The euro rose to $1.3453 in late New York trading from $1.3436 late Wednesday. The British pound climbed to $1.9796 from $1.9761.

The dollar rose against the Japanese yen, edging up to 121.73 from 121.58.

Growth in the U.S. economy slowed to just 0.6 percent, the U.S. Commerce Department reported, the worst three-month showing in more than four years.

The growth rate marked a major loss of momentum from the 2.5 percent pace logged in the final quarter of last year.

Federal Reserve Chairman Ben Bernanke said the economy will not slide into recession this year, a sentiment backed by the Bush administration. But former Fed chief Alan Greenspan has put the odds at one in three.

The report was offset in part by a Labor Department report that found fewer people signed up for unemployment benefits last week. New filings dropped by 4,000 to 310,000, suggesting the job market is resisting the economic sluggishness.

U.S. economic data are being watched closely for pointers to the Federal Reserve's future interest rate course. The Fed has left its rates unchanged over recent months, even as the European Central Bank has raised the cost of borrowing.

Higher interest rates, a weapon against inflation, can bolster a currency by making investments denominated in it more attractive.

On Friday, another batch of U.S. economic data is scheduled for release, including figures on personal spending and income, home sales, and the Institute for Supply Management's May manufacturing index.

In other trading Thursday, the Canadian dollar continued its record climb against the dollar after hitting a 30-year high of 1.0709 Tuesday. It reached 1.0663, or 93.78 U.S. cents, before falling back to 1.0697, or 93.48 U.S. cents.

Canada's central bank on Tuesday held interest rates steady but indicated it might soon call for a hike to control inflation.

The dollar bought 1.2254 Swiss francs, down from 1.2259 late Wednesday.