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US dollar headed for eleventh weekly gain as GDP accelerates

H.S. Borji
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US dollar headed for eleventh weekly gain as GDP accelerates

The US dollar appreciated against a basket of currencies Friday and is headed for its eleventh consecutive weekly gain following a second upward revision to second quarter GDP.

The US dollar index, a weighted average of the greenback’s performance against a basket of currencies that includes the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, advanced 0.27 percent to 85.42.

In economic data, the US economy grew at a faster rate in the second quarter than initially estimated, the Commerce Department reported today in Washington.

US gross domestic product, which measures the total value of goods and services produced in the economy, accelerated at an annualized rate of 4.6 percent in the April to June period. That was the second upward revision to GDP since the Commerce Department produced its advance estimate in July.

The government’s advance estimate showed annual GDP growth of 4 percent. That figure was revised up to 4.2 percent in August.

The latest figures, which are based on more complete data, said there was a larger contribution than previously estimated in nonresidential fixed investment and exports. On balance, however, “The general picture of economic growth remains the same,” the Commerce Department said in its press release.

Overall, the increase in real GDP in the June quarter was due to positive contributions from personal consumption expenditures, exports, private inventory investment, nonresidential fixed investment, residential fixed investment and government spending.

The latest GDP revision supports the view the US economy is accelerating at a rapid pace following the first quarter slowdown. Economic growth is expected to remain robust in the third quarter. According to early estimates, US GDP is on pace to grow more than 3 percent annually in the June to September period.

A stronger recovery in the second half of the year will continue to support the US dollar, which has benefited from speculation the Federal Reserve could begin lifting interest rates earlier than initially assumed. Data-inspired rate-hike speculation helped the US dollar index appreciate 1 percent this week. The index has gained a staggering 7.1 percent since July 1.

The greenback resumed its upward climb in the latter half of the week amid news of an improving housing market. New US house sales surged 18 percent to 504,000 in August, the Commerce Department reported on Wednesday. That was the biggest monthly gain since 1992.

The dollar traded steadily on Thursday following mostly in line durable goods orders and services PMI.

US durable goods orders moderated in August, falling 18.2 percent, after a record surge the previous month that was due to bigger demand for civilian aircraft.

Excluding the volatile transportation category, orders for durable goods increased 0.7 percent, official data showed.

The service economy maintained its robust growth pace in September, Markit Group reported on Thursday, as new business expanded at the fastest pace since June. The national index of US service activity eased to 58.5 from 59.5, the flash estimate showed.

Markit’s final estimate of September services PMI will be released next week.

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