The dollar rose against the yen and traded little changed against the euro early Wednesday after a government report showed the U.S. economy was stronger than first believed in the first half of the year.
The Commerce Department said real gross domestic product for the second quarter was revised to 2.9% annualized from the earlier estimate of 2.5%. The economy grew 5.6% in the first quarter.
The revisions to the second-quarter GDP were largely due to higher investments in nonresidential structures, more inventory building and higher exports, offset by lower investments in housing.
Overall, the report is unlikely to have much lasting impact on the greenback. We look for range-bound dealings to prevail.
In early New York trading, the euro was quoted at $1.2831, compared with $1.2824 late Tuesday. The dollar changed hands at 116.98 yen, compared with 116.65 yen.
The British pound traded at $1.9030 compared with $1.8982. The dollar was last at 1.2286 Swiss francs, compared with 1.2283 francs.
The euro fetched 150.14 yen, compared with 149.58 yen.
Earlier, the greenback showed little reaction to a monthly Automatic Data Processing national employment report that showed U.S. nonfarm private payroll-sector payrolls grew by 107,000 in August.
Adding in the average 10,000 government jobs created in a typical month in the past year, the ADP report would indicate growth in nonfarm payrolls of about 117,000 in August.
The Labor Department will report on the August nonfarm payroll figures Friday. Economists expect a gain of about 130,000 jobs, including government employment.
The U.S. economic numbers this morning painted a softer outlook for the U.S. economy, We could very well see a weak non-farm payrolls number on Friday.
The dollar has not reacted much since GDP is a backward looking indicator and ADP has been unreliable in recent months. However, both reports are certainly more dollar bearish than the opposite
Euro sets new high vs. yen
Meanwhile, the euro surged to a fresh record against the yen after a weaker than expected Japanese retail sales figure reinforced expectations interest rates in the world's second largest economy will remain low for some time.
Retail sales fell 1.7% month-on-month in July, while wages fell for the first time in six months by 0.1% year-on-year.
After outperforming most major currencies yesterday, it was a return to business as normal for the yen today.
Traders are looking ahead to the European Central Bank's interest-rate announcement Thursday. The ECB is widely expected to leave its interest rates unchanged at 3%, although ECB head Jean-Claude Trichet may signal that a rate hike should be expected in October. The dollar fell against major foreign-exchange counterparts Tuesday, after the minutes of the latest Federal Reserve policy-setting meeting offered little insight into the direction of future U.S. interest rates.
A new Fed staff forecast of below-trend growth over the next year and a half was a key factor in the central bank's decision to stop tightening in early August after two years of steady rate hikes, according to the minutes. Many FOMC members saw the decision as a "close call" and agreed further rate hikes might be needed.
