US dollar hit a new session low against the Japanese yen on Wednesday after the release of disappointing Q1 GDP data from the United States.
USD/JPY crumbled to 97.34 at 12:36 GMT, after which consolidated at 97.50. The cross was losing 0.37% for the day.
Earlier on Wednesday the Commerce Department of the United States announced that US economy managed to expand by 1.8% during the first quarter of the year on annual basis, below the expected 2.4% increase, as business investments and consumer expenditures were significantly revised down, because of concerns US economy probably slowed down during the recent months. The final Q1 GDP results were revised down from 2.4% previously. Data implied that economy has registered expansion for the last 15 consecutive quarters, but, however, the average growth rate was 2%, yet among the slowest rates, recorded since World War II. This GDP result came in consonance with weaker figures, regarding consumer spending in the United States. Personal Consumption Expenditures rose by 2.6% during Q1 on annual basis, slowing down in comparison with projections and the recorded rate of increase in the previous period, which was 3.4%. Consumer spending is a crucial indicator for economic activity, because it was the main driving force behind economic growth during the first three months of 2013. Market players were interested to what extent US consumers could support growth during the second quarter. A possible revitalization of conditions in housing and labour markets may prove encouraging for households in the United States to go out and spend.
Additionally, in an interview for CNBC the president of the Federal Reserve Bank of Minneapolis, Narayana Kocherlakota, said that he projected US Unemployment rate to have remained on levels above 7% until the middle of 2014 at least. He also expressed his approval of FEDs bond-purchasing strategy, which should continue until unemployment rate decreased below the 7% level.
Meanwhile, the Japanese yen had strengthened against the dollar earlier, after Japanese shares plunged on sustained fears, regarding the credit shrinkage in China, despite assurances from the country’s central bank that its actions meant to support financial institutions with liquidity.
US dollar was off three-week highs against the euro, as EUR/USD cross fell down to 1.3031 at 12:42 GMT. European Central Bank President Mario Draghi said on Wednesday that the overall economic outlook for the single curency zone still warranted accommodative monetary policy.
The greenback pared gains against the British pound, as GBP/USD rose to 1.5392 at 12:37 GMT. The Bank of England’s report on financial stability gave a warning to banks, insurers and borrowers of the dangers in case of a sharp rise in interest rates on Wednesday. The bank also said, that the financial crisis in the Euro zone could still pose a threat to UK economy.
Ultimately, the dollar index fell by 0.20% to 82.870.
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