The dollar fell against higher- yielding currencies before a U.S. report forecast to show economic growth slowed to the least in a year, fueling bets the Federal Reserve will resume its stimulus program.
The euro swung between gains and losses as investors considered the responses suggested by policy makers to the region’s debt crisis. U.S. gross domestic product growth slowed to an annual rate of 1.4 percent in the second quarter, from 1.9 percent in the previous three months, according to economists surveyed by Bloomberg News.
“There has been a significant slowdown in the second quarter and that will drag GDP growth closer to stall speed,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The dollar is trading lower, reflecting building investor expectations of further policy actions to try to alleviate the downside risk to global growth.”
The U.S. currency weakened 0.1 percent to $1.2286 per euro at 7:55 a.m. New York time, having dropped 1.2 percent this week. The greenback was little changed at 78.17 yen. The euro gained 0.1 percent to 96.13 yen.
The dollar depreciated the most against the South Korean won, and the New Zealand and Australian currencies among its 16 major counterparts.
Fed Chairman Ben S. Bernanke said last week that policy makers are “looking for ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labor market.” The Fed will hold a two-day policy meeting starting July 31.
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