Dollar mixed after report shows weak economy

AP News
Posted: Oct 29, 2010 3:47 PM
Dollar mixed after report shows weak economy

The dollar gave up most of its overnight gains against the euro and inched closer to its weakest point against the yen in decades Friday after a report showed tepid U.S. growth, underscoring the Federal Reserve's case for more support for the economy.

The U.S. economy grew 2 percent from July to September, the Commerce Department said, faster than the 1.7 percent pace from April-June. But economists say that's too slow to get employers hiring enough to bring down the 9.6 percent unemployment rate.

Because of weak hiring and the threat of dropping prices, investors expect that the Fed will announce a program of bond buying at its Nov. 2-3 meeting aimed at stimulating the economy. The lower interest rates resulting from such a program would weigh down the dollar against other currencies that have higher rates. The dollar has been trading heavily near multi-month and multiyear lows in the past week as investors gird themselves for the central bank's action.

In late trading in New York Friday, the euro was worth $1.3897 from $1.3926 late Thursday. It had dropped as low as $1.3806 in earlier trading in Europe. The euro has been traded heavily in a range from $1.37 to $1.40 since hitting a nine-month high of $1.4157 on Oct. 15.

The dollar slid to 80.49 Japanese yen from 81.07 yen. The dollar is hovering just above a 15-year low of 80.42 yen struck on Monday, and the U.S. currency is close to its weakest point since World War II of 79.75 yen, reached on April 1995.

The yen has continued to rise despite efforts to curb its gains. Japanese officials intervened in foreign exchange markets last month. The Japanese central bank cut interest rates to almost zero in October. Alongside dropping demand for the U.S. dollar, investors continued to push up the yen, putting pressure on Japan's big exporters and the country's fragile recovery from the recession.

A rising currency cuts into profits of goods sold overseas. It can also make a country's exports pricier compared to goods from countries with weaker currencies.

Elsewhere Friday, the British pound rose to $1.6021 from $1.5931, while the dollar fell to 1.0203 Canadian dollars from 1.0212 Canadian dollars. The U.S. currency rose to 0.9855 Swiss francs from 0.9832 Swiss francs.

The dollar also remained lower against emerging-market currencies in Latin America, the Scandinavian currencies and the Australian and New Zealand dollars.