Dollar rallies after GDP report

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- The dollar rose against its main trading partners Friday as investors welcomed a stronger-than-expected reading on U.S. economic growth.

What prices are doing: The dollar was up 0.7% against the euro at $1.3867 and rose 0.8% versus the U.K. pound at $1.5999. Against the Japanese yen, the dollar gained 0.5% to ¥90.39.

What's moving the market: Gross domestic product, the broadest measure of economic activity, rose at a 5.7% annual rate in the last three months of 2009.

That compares with a 2.2% rate in the third quarter and forecasts for a 4.7% rate. It was the strongest growth rate in six years and provided another sign that a recovery in the economy is taking hold.

In other economic news, the Chicago PMI, a regional manufacturing survey, rose to 61.5 in January, versus a forecasted decline to 57.2.

The Reuters/University of Michigan final index of consumer sentiment rose to 74.4 in January from 72.5 the month before. Economists had expected it to rise to 73.

"The numbers certainly played into the current dollar strength we've observed recently," said Vassili Serebriakov, a currency strategist at Wells Fargo. "Overall, the response from the dollar has been positive."

The euro remained under pressure amid ongoing concerns about Greece and the debt problems facing other struggling European economies.

"The Euro Zone fiscal troubles are probably the key driver for the euro," Serebriakov said.

Meanwhile, stocks tumbled in afternoon trade as investors remain wary about the outlook for global economic growth. Traders said the market remains jittery in the wake of President Obama's proposed banking regulations and sings China is moving to cool its robust economy.

What analysts are saying: Traders will look to a slew of economic reports next week for signs the economy is continuing its gradual recovery.

The week ahead brings reports on personal income and spending, national manufacturing data, and the government's all-important monthly jobs report on Friday.

"Obviously how the dollar does will depend on what the numbers show," Serebriakov said. "But the overall momentum is still dollar-supportive."

He said the dollar could be hurt if the jobs report comes in worse than expected, "but even if we do see a pullback it will probably be limited." To top of page

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