By Don Curren Of DOW JONES NEWSWIRES
TORONTO (Dow Jones)--The dollar ended markedly lower across a range of currencies Friday as stock market strength, risk appetite and month-end flows combined to propel investors to its rivals.
The dollar was able to rally briefly in morning trading after the first estimate of domestic product data for the second quarter was released, but surrendered its gains as stocks rallied.
"We saw the dollar doing a little bit better after the GDP report, which was mainly due to the fact that equities got weaker, and the dollar sold off as equities went stronger again," Vassili Serebriakov, currency strategist at Wells Fargo Bank in New York.
That latter move set the tone for the rest of the day, with the dollar remaining in retreat in sometimes volatile trading.
After remaining in positive territory for most the session, stocks shifted to a mixed profile in late trading with narrow losses in some indexes and modest gains in others.
Technical factors also supported the dollar's rivals on Friday, analysts said.
"I think there's a whole host of things that have come together to push the U.S. dollar lower," said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto.
"The same story remains intact, which is that we continue to see fairly violent moves, with an overall bias towards U.S. dollar weakness," she said.
The euro gained as high as $1.4280, reversing its midweek sell-off, while the pound gained as high as $1.6730. The dollar fell as low as Y94.50 before recovering modestly in quieter afternoon trading.
Late Friday afternoon, the euro was at $1.4255 from $1.4071, and at Y134.95 from Y134.35. The dollar was at Y94.66 from Y95.50 late Thursday, according to EBS. The dollar was at CHF1.0690 from CHF1.0875. The U.K. pound was at $1.6697 from $1.6493.
The first estimate of second quarter U.S. GDP data presented something of a conundrum for markets. Overall GDP declined at a seasonally adjusted 1.0% annual rate, better than the 1.5% expected by economists, but consumer spending, which traditionally accounts for some 70% of U.S. growth, slid by 1.2% in the quarter after rising 0.6% in the first.
The worrisome signs in the U.S. second-quarter gross domestic product reported earlier Friday underscored calls for a different safe haven than the dollar, boosting the yen and Swiss franc, some analysts said.
But Wells Fargo's Serebriakov said the data suggest an improving outlook growth that should ultimately prove supportive for the U.S. dollar.
The move into riskier assets was boosted by a closely watched measure of economic activity in the Chicago area, which rose to its highest reading since September 2008, bolstering expectations the recession will end this year.
Month-end flows were also considered supportive for non-U.S. currencies Friday.
"Stocks gained in the month of July, and so portfolio managers tend to need to hedge, and sell more dollars based on the gains we've experienced," said Brian Dolan, chief currency strategist at Forex.com.
Those stock gains are in dollars. As a result, money managers have larger positions in dollars and have to get rid of them at the end of the month.
Traders may have been encouraged to sell the dollar after the release recently of an International Monetary Fund report that said the U.S. dollar is "moderately overvalued."
This came after an IMF report on the euro zone Thursday that said the euro was somewhat overvalued, which had caused the common currency to dip versus the dollar.
TORONTO (Dow Jones)--The dollar ended markedly lower across a range of currencies Friday as stock market strength, risk appetite and month-end flows combined to propel investors to its rivals.
The dollar was able to rally briefly in morning trading after the first estimate of domestic product data for the second quarter was released, but surrendered its gains as stocks rallied.
"We saw the dollar doing a little bit better after the GDP report, which was mainly due to the fact that equities got weaker, and the dollar sold off as equities went stronger again," Vassili Serebriakov, currency strategist at Wells Fargo Bank in New York.
That latter move set the tone for the rest of the day, with the dollar remaining in retreat in sometimes volatile trading.
After remaining in positive territory for most the session, stocks shifted to a mixed profile in late trading with narrow losses in some indexes and modest gains in others.
Technical factors also supported the dollar's rivals on Friday, analysts said.
"I think there's a whole host of things that have come together to push the U.S. dollar lower," said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto.
"The same story remains intact, which is that we continue to see fairly violent moves, with an overall bias towards U.S. dollar weakness," she said.
The euro gained as high as $1.4280, reversing its midweek sell-off, while the pound gained as high as $1.6730. The dollar fell as low as Y94.50 before recovering modestly in quieter afternoon trading.
Late Friday afternoon, the euro was at $1.4255 from $1.4071, and at Y134.95 from Y134.35. The dollar was at Y94.66 from Y95.50 late Thursday, according to EBS. The dollar was at CHF1.0690 from CHF1.0875. The U.K. pound was at $1.6697 from $1.6493.
The first estimate of second quarter U.S. GDP data presented something of a conundrum for markets. Overall GDP declined at a seasonally adjusted 1.0% annual rate, better than the 1.5% expected by economists, but consumer spending, which traditionally accounts for some 70% of U.S. growth, slid by 1.2% in the quarter after rising 0.6% in the first.
The worrisome signs in the U.S. second-quarter gross domestic product reported earlier Friday underscored calls for a different safe haven than the dollar, boosting the yen and Swiss franc, some analysts said.
But Wells Fargo's Serebriakov said the data suggest an improving outlook growth that should ultimately prove supportive for the U.S. dollar.
The move into riskier assets was boosted by a closely watched measure of economic activity in the Chicago area, which rose to its highest reading since September 2008, bolstering expectations the recession will end this year.
Month-end flows were also considered supportive for non-U.S. currencies Friday.
"Stocks gained in the month of July, and so portfolio managers tend to need to hedge, and sell more dollars based on the gains we've experienced," said Brian Dolan, chief currency strategist at Forex.com.
Those stock gains are in dollars. As a result, money managers have larger positions in dollars and have to get rid of them at the end of the month.
Traders may have been encouraged to sell the dollar after the release recently of an International Monetary Fund report that said the U.S. dollar is "moderately overvalued."
This came after an IMF report on the euro zone Thursday that said the euro was somewhat overvalued, which had caused the common currency to dip versus the dollar.
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