Euro and pound fall as overseas rally fades. Dour reading on U.S. economy boosts demand for low-yielding currencies.
NEW YORK (CNNMoney.com) -- The U.S. dollar rose Thursday after being pushed lower earlier in the session by rising stock prices overseas.
The euro fell 0.6% to $1.2884 from $1.2956 late Wednesday in New York.
Britain's pound traded lower at $1.6296, up from $1.6375.
Against the yen, the dollar rose 0.5% to ¥97.795 from ¥97.235.
The dollar came under pressure earlier in the session as Asian and European markets rallied after the U.S. central bank lowered its benchmark interest rate to 1% and announced plans to establish $30 billion swap facilities with central banks in emerging markets.
"There was some enthusiasm overnight from fed rate cut," said Vassili Serebriakov, currency strategist at Wells Fargo & Company's foreign exchange division. "But some of that enthusiasm is wearing off," he added.
European shares were mixed in late day trading. The FTSE-100 stock index in London was down about 1%. France's CAC-40 fell 1.4% and Germany's DAX rose 1.2%
Currency traders often buy higher yielding currencies such as the euro and the pound when stock prices are rising and sell those currencies in favor of lower yielding currencies like the dollar when markets are volatile.
Stock prices in the United States were moderately higher. The major indexes opened higher but trimmed gains at midday as investors responded to a government report that showed the nation's economy shrank in the third quarter.
"The market is taking a step back after the weak GDP figures," said Gareth Sylvester, senior currency analyst at foreign exchange brokerage HiFx.
Gross Domestic Product, the broadest measure of the nation's economy, fell at an annual rate of 0.3% in the third quarter after growing at a 2.8% rate in the second quarter.
