The dollar slipped against the yen and euro on Thursday after a robust, but slightly weaker-than-expected reading of US economic growth failed to bolster expectations for a June rate increase.
The US currency weakened after revised data showed first-quarter gross domestic product rose 5.3 percent, below expectations of a 5.7 percent gain.
Some strategists noted that the backward-looking nature of the report tempers the case for the Federal Reserve raising interest rates again in June, even though the first-quarter's pace of growth was more than three times the rate recorded in the fourth quarter of 2005.
"The dollar is a little weaker as a result of this morning's reports, particularly the weaker-than-anticipated GDP report," said Alex Beuzelin, senior market analyst at Ruesch International in Washington, D.C. "But overall they are not heavyweight items, so we are seeing the dollar adhere to intraday ranges."
The Fed has lifted rates 16 times since mid-2004 to 5 percent and has said future moves will be tied to incoming economic data.
"There's little to lead us to conclude that the Fed is going to take the data away as a reason to continue hiking rates," said Naomi Fink, foreign exchange strategist at BNP Paribas in New York, adding that it is not "a barrier to dollar bearishness."
Meanwhile, markets were gearing up for a solid advance in Japanese consumer price data. That drove the yen higher against both the euro and dollar.
Japan's April core consumer price index is seen up 0.5 percent, according to a Reuters survey. That would boost the odds of a Bank of Japan interest rate hike later this year. In mid-afternoon trading in New York, the dollar was down 1 percent against the yen at 111.80, off Wednesday's two-week high of 112.97. The euro was down 0.7 percent against the yen at 142.98 yen.
Against the dollar, the euro was up 0.3 percent on the day at $1.2788, off its $1.2802 session peak.
Hugh Walsh, vice president of foreign exchange at Fortis Bank in New York, said Fitch Ratings agency's move to put Italy's sovereign credit rating on negative watch was sapping some of the euro's strength.
Trading volume was thin, with most of Europe out for the Ascension Day holiday and the long Memorial Day weekend in the United States approaching, investors said.
Overnight, the dollar weakened on comments from Chinese banking authorities about reining in property lending.
The US currency also lost ground after Russia said it intends to invest 45 percent of its $71.5 billion stabilisation fund - designed to mop up excess cash earned from oil sales - in euros.
Sterling was up 0.2 percent against the dollar at $1.8710. The dollar was flat against the Swiss franc at 1.2179 francs.
The dollar showed little reaction to data showing US existing home sales fell 2.0 percent in April after no changes the prior month.
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