MW: Dollar rises vs. euro, yen after Q4 GDP revised higher
The dollar strengthened against its main rivals Friday after a stronger read on fourth-quarter economic growth was seen as emboldening those Federal Reserve policy makers who believe the group should be open to raising interest rates in March.
The dollar USDJPY, +0.67% traded at ÂĄ113.39 after the data, compared with ÂĄ112.94 late Thursday in New York. The U.S. currency strengthened against the shared currency EURUSD, -0.6353% which fell to $1.0967 from $1.1024.
Growth in gross domestic product was marked up to 1%, up from an initial reading of 0.7%. The data were seen by some as a rebuke to bearish investors and analysts who believe the U.S. economy is headed toward recession, although others flagged the upward revision to inventories as a worry.
Jane Foley, senior currency strategist at Rabobank, said the GDP report helped alleviate concerns about the manufacturing sector. A preliminary reading on sector activity in February released earlier this week came in below expectations, but still indicated growth.
“It calms market concerns which have been shaken up in recent weeks about the slower manufacturing data released in the U.S. and concerns about how robust the U.S. economy is overall,” Foley said.
Investors are now looking ahead to a reading on consumer-price inflation due at 10 a.m. Eastern.
The Fed futures market is pricing in a 54.4% chance that the Fed will keep interest rates on hold this year, but many market strategists believe there will be at least one.
Federal Reserve policy makers on opposite sides of the issue are spelling out their views. Earlier this week, Kansas City Fed President Esther George, a leading hawk on the Fed’s rate-setting committee, said the central bank should “absolutely” consider raising interest rates in March.
On Thursday, St. Louis Fed President James Bullard, a recently converted dove, said raising interest rates would be “unwise.”
The ICE U.S. Dollar index DXY, +0.36% , a measure of the dollar’s strength against a basket of six rivals, was up 0.6% at 97.8250.
Separately, Zhou Xiaochuan, the governor of the People’s Bank of China, sought to reassure China’s trading partners that Beijing won’t drastically weaken the yuan and that Beijing has sufficient tools to support the economy. He spoke at a news conference ahead of Friday evening’s meeting of finance chiefs from the Group of 20 major economies.
