The dollar fell slightly against the euro on Friday as investors took profits on gains posted earlier in the session after news that US economic growth in the fourth quarter was a touch faster than expected.
A sharp fall in the University of Michigan's consumer sentiment report for February, as well as a report that the European Central Bank would not cut interest rates next week, also contributed to the dollar's fall.
The dollar shrugged off reports showing continued firm business activity in the New York and Chicago regions.
By midday in New York, the euro traded at $1.2467 after having fallen to $1.2374 against the dollar in early global trade. The euro has lost more than five cents from last week's record high near $1.2930.
"The market was pretty well positioned long-dollar, so there was a little bit of a sell-off in that $1.24 area since there is no great surprise in the data," said Andrew Chaveriat, technical strategist at BNP Paribas in New York. The government said gross domestic product, a broad measure of the health of the US economy, rose at a 4.1 percent annual rate in the fourth quarter, a tad higher than the 4 percent rate first reported but well below the third quarter's blistering 8.2 percent rate.
Earlier in the global trading day the dollar rose to fresh one-month highs versus the euro, extending its rally ahead of talks between German Chancellor Gerhard Schroeder and US President George W. Bush on Friday.
A German government source said Schroeder will make euro strength against the dollar a main theme in the meeting. French and German politicians are concerned about the euro's strength and Schroeder has called for a cut in European interest rates.
While the ECB dislikes political pressure, speculation is growing it might consider lowering rates if there is evidence euro strength is putting downward pressure on inflation.
A first estimate of euro zone inflation data showed inflation slid to an annual rate of 1.6 percent in February, below the ECB's target ceiling of 2.0 percent. A report by Medley Global Advisors, a macroeconomic and political risk research firm, discounted prospects that the ECB will cut interest rates next week.
The dollar traded down 0.4 percent against the yen at 109.17 yen, off this week's three- month high of 109.83 yen.
The dollar hit three-year lows near 105.15 yen earlier this month.
The US currency was little changed versus the pound and the Swiss franc.
The University of Michigan's final reading of consumer sentiment slipped to 94.4 in February from January's final reading of 103.8, which was its highest level in over three years. The result was slightly higher than market expectations of 93.5.
Another report from the National Association of Purchasing Management-Chicago Business showed activity in the US Midwest expanded for a 10th straight month in February but at a slower pace than in January. Its index fell to 63.6 in February from 65.9 in January.
The National Association of Purchasing Management-New York's business conditions index rose to 267.2 in February from 257.3 in January, its highest since September 2001, when the city, already in recession, was hit by the Sept. 11 attacks.
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