By Hannah Lang
NEW YORK (Reuters) -The dollar fell on Thursday after revised data showed gross domestic product, the broadest measure of economic activity, grew more slowly in the first quarter than previously expected.
The Commerce Department reported that the U.S. economy grew at an annual rate of 1.3% from January through March, down from the previous estimate of 1.6% following downward revisions to consumer spending.
The downward revision to first-quarter growth followed recent weakness in retail sales and equipment spending data, which had helped ease expectations of Federal Reserve interest rate cuts.
“This is definitely something the Fed was looking for. All of these numbers are falling short of expectations… and taking some of the pressure off the Fed,” said Helen Given, FX trader at Monex USA.
A two-day 15 basis point rise above 4.6% for long-term Treasury yields had helped push the dollar to a two-week high on Wednesday by boosting the attractiveness of U.S. Treasury bonds.
The index tracking the US currency against its major peers climbed overnight to 105.18, its highest level since May 14, but was last down 0.37% at 104.74.
The release of the Personal Consumer Expenditure Price Index (the Fed’s preferred inflation measure) on Friday could provide further clues as to how the central bank might move forward with interest rate cuts later this year.
That reading could “move the needle a little more than the current GDP data,” said Eugene Epstein, head of structuring for North America at Moneycorp.
Expectations for Fed rate cuts this year have been lowered amid signs of persistent inflation, most recently with a surprise rise in consumer confidence in Tuesday’s data.
The dollar fell 0.53% against the Japanese yen at 156.805, after hitting a one-month high of 157.72 the day before.
Market players suspect Japan intervened in late April and early May to support its currency, which data could confirm on Friday.
“Japanese authorities intervened near this level on May 1 and the market now sees 158 as a key point for possible intervention,” said Charu Chanana, head of FX strategy at Saxo Bank.
The euro rose 0.3% to $1.083 after falling 0.5% on Wednesday and hitting a two-week low at $1.0789 overnight. Sterling rose 0.26% to $1.2734 after also falling 0.5% on Wednesday.
Price data for the eurozone will be released on Friday, following stronger-than-expected April inflation for Germany on Wednesday.
In cryptocurrencies, bitcoin last rose 2.28% to $68,940.33.
