The dollar dropped 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. Benefiting from the dollar's losses, the euro climbed to an eight-week peak, buoyed by data showing a euro zone recovery gathering pace.
The dollar index, a gauge of the greenback's value against major currencies, hit its lowest level since late February, falling for a 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 a 1.0 percent growth.
"The(GDP) breakdown is not as weak as the final sales number and inventory build data suggests," said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York. In midday trading, the dollar index was down 1.4 percent at 94.813. It dropped to 94.746, a nine-week trough, and has lost 4.5 percent the last three weeks. The euro, meanwhile, rose above $1.11, last at $1.1169, supported by data showing lending to euro zone households and companies rose in March for the first time in three years.