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Dollar boosted by strong US growth

The dollar pushed higher against other major currencies on Wednesday (July 30) helped by a stronger-than-expected initial estimate for second-quarter US economic growth.

NEW YORK: The dollar pushed higher against other major currencies on Wednesday (July 30) helped by a stronger-than-expected initial estimate for second-quarter US economic growth.

The Commerce Department reported the economy rebounded to a 4.0 per cent growth pace in the April-June period after the sharp contraction of the first quarter, caused largely by extremely severe winter weather across most of the eastern half of the country.

That sent the dollar up to $1.3367 per euro, its highest level since November, before settling at $1.3395. It also jumped to 103.09 yen, and to $1.6890 per pound, before slightly paring those gains. 

Hours after the economic growth report the Federal Reserve issued a fresh monetary policy statement that, as expected, made no fundamental changes to its course on tapering the stimulus and held the federal funds rate at its near-zero level. The Fed expressed continued concern about weaknesses in the labour market, but in a slight change in language it acknowledged the rise in inflation, but saw no major threat.

Jens Nordvig of Nomura said the Fed's statement suggests possible changes to policy that would be bullish for the dollar if jobs data strengthens and inflation picks up as expected in the coming months. "As we get closer and closer to Fed targets, we are likely to trigger a change in Fed tone over the next three months," he said.

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