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US Dollar Gains Traction as GDP Accelerates

H.S. Borji
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US Dollar Gains Traction as GDP Accelerates

The US dollar advanced for the seventh time in eight days Wednesday amid signs the US economy accelerated at a faster pace in the second quarter, while job creation in July surpassed the 200,000 mark.

The US dollar index, a weighted average of the greenback’s performance against six of its major rivals, increased 0.33 percent to 81.48. The dollar index has advanced 2.1 percent since the beginning of July amid signs the Federal Reserve may consider boosting interest rates sooner than expected.

In economic data, US gross domestic product grew faster than forecast in the second quarter, raising expectations for sustained growth in the second half of the year after a disastrous first quarter saw the economy contract for the first time since 2009.

The US economy expanded at an annualized rate of 4 percent in the three months through June, the Commerce Department reported today in Washington.

Economists forecast the advance estimate to show a 3.1 percent annual increase.
The economy contracted 2.1 percent in the first quarter, an improvement from the previous estimate showing a 2.9 percent decline.

The increase in GDP was mainly due to higher levels of personal consumption expenditure, private inventory investment, exports, nonresidential fixed investment, residential fixed investment and government spending.

A separate report from the ADP Institute showed US job creation remained elevated in July, led by a notable increase in the service economy.

Employers added 218,000 private payrolls in July, following an increase of 238,000 the previous month. Economists forecast a gain of around 235,000.

The service-producing sectors led the advance, adding 202,000 payrolls. Employment in the goods-producing sectors increased only 16,000 from the previous month.

Employment rose the fastest in professional and business services (61,000), followed by the trade, transportation and utilities industry (52,000).

“The July employment gain was softer than June, but remains consistent with a steadily improving job market,” said Moody’s Analytics chief economist Mark Zandi in a statement. “At the current pace of job growth unemployment will quickly decline. Layoffs are still receding and hiring and job openings are picking up. If current trends continue, the economy will return to full employment by late 2016.”

Based on ADP’s calculations, July marked the fourth consecutive month employment gains were above 200,000.

The Labor Department’s tallies suggest job creation has surpassed the 200,000 mark in each of the five months through June. Friday’s government report is expected to show employers added up to 271,000 nonfarm payrolls in July, which would mark the sixth consecutive month job creation eclipsed the 200,000 mark.

The unemployment rate fell to 6.1 percent in June. Jobless claims – a narrower measure of unemployment – declined 19,000 to a seasonally adjusted 284,000 in the week ended July 19, an eight-and-a-half year low.

The four-week average for jobless claims dropped 7,250 to 302,000, the lowest level since May 2007.

Continuing jobless claims, which track the number of workers continuing to receive unemployment benefits, declined 8,000 to a seasonally adjusted 2.5 million in the week ended July 12, official data showed.

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