NEW YORK, July 26: The dollar dipped against the euro on Friday as investors sought a safe haven despite economic reports that offered signs of a possible US recovery underway.
The euro was at $1.5703 up from 1.5683 late Thursday.
The dollar rose to 107.85 yen from 107.19.
Stronger economic data has driven the US dollar higher against many of the major currencies, Kathy Lien, chief strategist at Forex Capital Markets, said.
New home sales, consumer confidence and durable goods were all better than the market expected, a sign that the mood of US consumers and businesses may be changing, she said.
However, Lien warned: Today’s economic releases were almost too good to be true and for that reason, we are cautiously bullish.US durable goods orders rose 0.8 per cent in June, much stronger than analyst forecasts for 0.3 per cent.
Economists said the data suggested that US second-quarter gross domestic product (GDP) growth could prove healthy.
Overall, a surprisingly strong report, which supports our view that second-quarter GDP increased by a solid 2.5 per cent on the year, said Paul Ashworth, senior US economist at Capital Economics.
The US government is due to release its initial estimate of second-quarter GDP growth Thursday. Most analysts expect a smaller acceleration to a 1.8 per cent pace of the year.
The Federal Reserve on Wednesday said in its Beige Book report that US economic activity appears to have slowed to a crawl in the past weeks even as price pressures intensified.
The Fed’s latest survey of the US economy will be used by its policymakers for their August 5 meeting. They are widely expected to leave the key interest rate unchanged at 2.00 per cent.
In other data released Friday, the University of Michigan’s consumer confidence index rose to 61.2 in late July from a reading of 56.6 in early July, smashing analyst expectations for a reading of just 56.4.
The Commerce Department reported a smaller-than-expected fall in new US home sales in June, raising glimmers of hope that the worst housing slump in decades was nearing a bottom.
Last month’s new home sales fell 0.6 per cent to a seasonally adjusted annual rate of 530,000 units, solidly beating market expectations.
The euro, which last week hit a record-high $1.6038, has since wobbled on dismal data that has raised fears of recession in the 15-nation bloc.
The economic data in the EZ (eurozone) shows incontrovertible signs of a slowdown, but the news from the other side of the Atlantic is not much better,said Boris Schlossberg at Forex Capital Markets.
The pound climbed against the dollar after second-quarter British growth was reported at 0.2 per cent, just below expectations of a 0.3 per cent pace.
Analysts said the benign data boosted market confidence that the Bank of England will leave interest rates unchanged at its next meeting in August.
We are still of the view that the (bank) will avoid raising rates this summer, said Philip Shaw at Investec.
Even so, it is clear that a cut in interest rates is a long way off and it is very likely that the economy will have to wait until early 2009 for any relief from monetary policy. In late New York trade, the pound was at $1.9913, up from 1.9865 late Thursday.
The dollar stood at 1.0366 Swiss francs, nearly unchanged from 1.0364.—AFP