The dollar rose to a seven-week high against the euro Friday, as strong U.S. jobs and manufacturing data damped expectations of a Federal Reserve interest rate cut this year.
Recent economic indicators indicated U.S. growth in the second quarter may outpace the previous period, triggering a rebound in the dollar from a record low against the euro in
April and a 26-year trough against the pound.
"Despite the weak GDP data in the first quarter, the latest reports have been better than expected, boosting growth expectations and the dollar," said Gregory Salvaggio, a vice president for trading at Tempus Consulting in Washington. "On top of that, there's been signs of a pickup in inflation and we all know that inflation is the Fed's main concern. That means no rate cuts in the near future."
The euro fell as low as $1.3393, the lowest since April 10, before trading back up . The dollar rose against the yen , within striking distance of 4-1/2-year highs around 122.20.
Against the Swiss franc, the dollar gained .
Against the Canadian dollar, however, the greenback fell to a 29-1/2-year low near C$1.0600. A U.S. trader said momemtum-oriented traders have been buying the
Data showing gains of 157,000 U.S. non-farm jobs in May kicked off a round of dollar buying earlier in the session, offsetting a fairly tepid U.S. core inflation number for April.
The dollar extended its gains after the release of the Institute for Supply Management survey, which showed its index of U.S. factory activity edging up to 55.0 from 54.7 in April. May's index was the highest since April 2006 and signaled above-trend growth for the U.S. economy.
After the ISM report, implied prospects for a rate cut this year fell to about 18% from 32%
Thursday, as reflected by eurodollar futures contracts.
"They are all solid numbers. Put it all together and it is just positive for the U.S. economic outlook and ... on the whole, (the) numbers are dollar-positive," said Ron Simpson, director of currency research at Action Economics in Tampa, Florida.
Friday's data followed a weaker-than-expected revision to first-quarter U.S. GDP Thursday. The U.S. economy grew at a 0.6% rate in the first three months of the year, the slowest pace in more than four years, according to government figures.
Next week's U.S. economic data -- led by the April international trade balance report and ISM's U.S. services survey -- are expected to offer little market impetus, traders say, and they expect currencies to trade within narrow ranges.