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FOREX Watch: US dollar breaks sticking point

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FOREX Watch: US dollar breaks sticking point

The US dollar advanced more than 0.3 percent against a basket of its major competitors, despite several batches of mixed data.

The US economy grew at an annualized rate of 2.5 percent in the second quarter, according to the third and final estimate from the Commerce Department. The figure, which was unrevised from the previous estimate, underwhelmed market participants, who expected the pace of growth to pick-up slightly.

The US dollar shrugged off disappointment after weekly jobless claims unexpectedly dropped by 5,000, shifting the four-week average to 308,000. Jobs data are widely believed to be the biggest factor to the Federal Reserve’s decision to taper the rate of asset purchases, currently locked at $85 billion a month. Continuing jobless claims for September 13 climbed 40,000 over the previous week, but remained well below expectations at 2.823 million.

The US dollar hit a two-week high against its northern counterpart, the loonie, as fears over the US debt ceiling favoured the greenback against riskier, commodity-driven currencies. Initial resistance was however too strong for the North American pair, forcing it to consolidate around 1.0325 after hitting a session high of 1.0340.

In Europe the greenback advanced more than 0.3 percent against the common currency, as the weight of the debt ceiling debate sent the EURUSD crashing beneath the initial support to settle around 1.3477. Elsewhere, the British pound eased off its highs after total business investment fell 2.7 percent in the second quarter, according to UK National Statistics. The GBP/USD fell more than 0.40 percent to 1.6015.

In Japan, speculation about Prime Minister Abe’s tax hikes helped the US dollar rise more than half a percent to break the 99.00 mark. The USDJPY has retraced most of the losses it incurred during the previous five days when the yen became the safe haven of choice amid US budget uncertainty.

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