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US Dollar Edges Higher, but will Gains be Capped?

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US Dollar Edges Higher, but will Gains be Capped?

The US dollar was trading higher against a basket of currencies after durable goods orders boosted the outlook on the US recovery.

Orders for manufactured goods meant to last three years or more increased 2.6 percent in March, following a revised gain of 2.1 percent in February, the Commerce Department reported today in Washington. Excluding transportation equipment, durable goods orders rose 2 percent, following a gain of only 0.1 percent in February.

The US dollar was little changed Wednesday, as the forex markets traded cautiously ahead of Thursday’s key reading. In the morning session, the US dollar index was at 79.90. The broad gauge of the US dollar’s performance rose to a session high of 79.97.

The US dollar received a strong boost last month after the Federal Reserve announced plans to reign in record stimulus this year and introduce a rate hike sometime next year. Since then, the greenback’s performance has been underwhelming.

The forex market’s initially subdued reaction to the durable goods report raises concerns about the dollar’s outlook. The greenback has struggled in recent weeks as investors look to determine the pace of US recovery. Several upbeat data releases offer hope the economy was regaining momentum at the end of the first quarter. However, Q1 growth forecasts are gloomy. The US economy is believed to have expanded 1.5 percent annually in the first quarter, down from 2.6 percent in the final three months of 2013.

The Commerce Department will provide an official estimate of first quarter GDP at the end of next month.

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