NEW YORK (MarketWatch) — The dollar turned down against a basket of major currencies Friday after reports on U.S. growth and consumer confidence had traders adjusting positions ahead of next week’s U.S. Federal Reserve policy meeting.
The dollar index (DXY 77.26, -0.05, -0.07%) , which measures the U.S. unit against a basket of six major currencies, fell to 77.209, compared with 77.516 before the growth report and down from 77.255 in late North American trading Thursday.
The euro (EURUSD 1.3913, -0.0012, -0.0862%) fell to $1.3922, erasing most of a decline from $1.3939 late Thursday.
The dollar (USDYEN 80.7200, -0.2900, -0.3580%) slipped to ¥80.70 from ¥81.01 late Thursday. That’s near a 15-year low of ¥80.41 set earlier this week and the all-time low of ¥79.75 set April 19, 1995.
The British pound (GBPUSD 1.5963, +0.0029, +0.1820%) turned up to $1.5974 from $1.5944. See real-time currency quotes and tools.
The dollar moved lower still after a report showed consumer sentiment in the U.S. had weakened. Read about consumer sentiment.
The gross domestic product report showed the U.S. economy grew at a 2% pace in the third quarter, in line with economists’ expectations. Read about U.S. GDP.
The policy-setting Federal Open Market Committee meets next Tuesday and Wednesday and is expected to announce a second round of quantitative easing, sometimes called QE2, which is generally negative for a currency.
“The GDP reading was by no means horrid, and therefore the likely scenario for the Fed is one of gradual, incremental implementation of QE2 rather than a massive monetary infusion,” said Boris Schlossberg, director of currency research at GFT.
The dollar had been higher earlier as traders reduced bets that the dollar would fall further.
“Short-term operators dominate ahead of next week’s events,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
Still, dollar losses may be limited as some say the easing steps are already priced into currency markets.
The dollar is “likely to recover after the FOMC, as markets have already priced in a relatively large amount of QE2, and the Fed is not likely to exceed those expectations significantly,” said currency analysts at Barclays Capital.
