Dollar drops to nine-week low in NY as US GDP weighs

The dollar sank to a nine-week low on Wednesday after data showed the US economy grew much more slowly than expected in the first quarter, reinforcing expectations for a gradual pace of interest rate rises by the Federal Reserve. The greenback, however, trimmed its losses after the Fed released its monetary policy statement following a two-day meeting. The dollar, though, was still on track to end the month lower after nine straight months of gains.
-- Euro rises to eight-week high
The Fed acknowledged the soft patches in the US economy, making it more likely it will not be ready to raise rates until at least September. But it did say the slowdown in the US economic growth during the winter months was due partly to transitory factors, a statement that supported the dollar. "The fact that policymakers continue to view the key drivers of the slower growth as 'transitory' suggests that their view of the economy may be slightly more upbeat than the color of recent economic reports may suggest," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
The dollar index, a gauge of the greenback's value against major currencies, hit its lowest level since late February, falling for the sixth consecutive day. Data on Wednesday showed the US economy grew just 0.2 percent in the first quarter, down sharply from the fourth quarter's 2.2 percent clip. The first-quarter reading was also much lower than market expectations for 1.0 percent growth.
In late trading, the dollar index was down 0.9 percent at 95.217, reducing losses after the Fed statement. It dropped to 94.678, a nine-week trough, and has lost 4.5 percent over the last three weeks. "It seemed like the market got ahead of itself, looking for a more dovish tone in the Fed statement," said currency trader Tim Harling of AFEX in Toronto."
Benefiting from the dollar's losses, the euro climbed to an eight-week peak. It was last up 1.1 percent at $1.1102, supported by data showing lending to eurozone households and companies rose in March for the first time in three years. Volume on euro trading versus the dollar was about $5.25 billion on the Thomson Reuters platform. Data also showed that euro/dollar volume on Wednesday was roughly 183 percent higher than the one-month average.