FOREX-Dollar advances on positive U.S. economic data
* US GDP, initial claims data support Fed taper in Sept
* Dollar rises vs yen as Syria tension eases
* Emerging FX relief seen supporting case for Fed taper
NEW YORK, Aug 29 (Reuters) - The dollar rose broadly on Thursday, helped by positive U.S. growth and jobless claims data that suggested the world's largest economy was on a firmer footing. The reports bolstered expectations the Federal Reserve will begin to scale back its massive asset-buying plan from next month, a view that had been undermined of late by a series of weak U.S. housing numbers. Data showed on Thursday that the U.S. economy accelerated more quickly than expected in the second quarter, growing 2.5 percent, thanks to a surge in exports.
"This is good news for the U.S. economy. One of the key concerns that the Fed has voiced recently has been the dichotomy between firm employment and soft GDP growth," said Vassili Serebriakov, currency strategist at BNP Paribas in New York. "This should ease some of those concerns." Still, Serebriakov doubted the reports would sway the minds of market participants who believe the Fed won't scale back stimulus from September. BNP Paribas, for one, has long held the view that the Fed will start winding down its asset purchases in December. "We think the U.S. economy is not yet at the point that would support a tapering," Serebriakov said. The dollar was up 0.6 percent against a basket of currencies at 81.941. Against the safe-haven yen, it was up 0.7 percent at 98.31 yen. The greenback was also supported by a fall in U.S. jobless claims to a seasonally-adjusted 331,000.
Market sentiment was still cautious, but prospects of an imminent Western attack on Syria weakened, given opposition in Britain and among U.S. lawmakers. U.S. Treasury yields rose, raising the dollar's appeal, after having fallen in recent days as investors sought refuge in low-risk government debt. Some said reduced tension in emerging markets also supported the U.S. currency as it reinforced bets the Fed would crimp monetary stimulus soon. "A slight easing of the tensions in Syria and emerging markets, has helped the dollar," said Simon Derrick head of currency research at Bank of New York Mellon. "Over the last few weeks tensions in emerging markets were seen as keeping pressure on the Fed to delay tapering which is dollar negative. With emerging markets now doing a little better, the dollar is higher." Analysts at Morgan Stanley expect the dollar to regain support against major currencies "as risk aversion eases, allowing some stabilisation in risky asset markets and potentially providing some relief to emerging currencies." Emerging markets, the first to be hit by an outflows of funds as investors braced for an eventual end of Fed stimulus, have experienced more turbulence as the Syrian crisis has made investors even more risk-averse. Against the buoyant dollar, the euro was down 0.7 percent at $1.3250. While a debt auction in Italy was relatively successful, borrowing costs for a new five-year bond rose as investors remained wary about the coalition government's stability, which weighed on the euro. The euro's recent resilience is likely running out of steam, according to the options market.