Dollar falls as data confirms weak US growth

AP News
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Posted: May 26, 2011 3:45 PM
Dollar falls as data confirms weak US growth

The dollar fell Thursday against other major currencies after a new report confirmed sluggish U.S. economic growth in the first three months of the year as high gas prices hurt consumer spending.

The euro rose to $1.4140 during late trading in New York, up from $1.4079 late Wednesday. The euro rose as high as $1.4206 earlier in the day.

Investors had been thinking that the risk of a debt default in Greece was at least a year away, but recent comments by European officials have led some traders to suspect there could be a default as soon as mid-July, said UBS currency analyst Brian Kim.

Traders "are pretty uncertain, pretty scared about what could happen" in Greece, Kim said. "We don't know what officials are truly thinking."

At a conference in Luxembourg, Jean-Claude Juncker, chairman of the group of 17 finance ministers from countries that use the euro, warned that the International Monetary Fund might not send Greece the 12 billion euros ($17 billion) it expects in June from its bailout package approved last year, JPMorgan economist David Mackie said in a research note.

Getting aid from the IMF is contingent on Greece sticking to its economic reforms, but politicians in Greece are fighting over new cuts in government spending as thousands of citizens demonstrate against austerity measures.

Finance Minister George Papaconstantinou has warned that a halt in the foreign cash flow would force Greece to default.

Elsewhere, the dollar remains weaker on concerns about a weakening U.S. recovery. The Commerce Department says the economy grew at an annual rate of 1.8 percent from January through March, unchanged from its previous estimate.

Expensive gas, a troubled housing market and high unemployment are making shoppers cautious about spending.

The Labor Department said more people applied for jobless aid last week, a sign that the job market is still weak. The number of people seeking benefits rose by 10,000 to a seasonally adjusted 424,000. A level below 375,000 claims is consistent with steady job growth.

The British pound rose to $1.6389 from $1.6279, while the dollar slipped to 81.30 Japanese yen from 81.97 yen.