Dollar Gains as Market Stabilizes, Data Supports

The US dollar gained on Thursday and retained its strength during the early hours of the Friday’s trading session. The currency rallied as markets stabilized after China’s scare. US economic data was also somewhat supportive for the greenback.

The second estimate of US gross domestic product showed that the economy expanded by 3.7 percent in the second quarter of this year. The reading was above both the median analysts’ forecast and the first estimate, not to mention the meager first quarter’s growth of 0.6 percent. Additionally, jobless claims fell a little last week. Not all the Thursday’s data was supportive for the dollar, though, as pending home sales rose in July far slower than experts had anticipated.

Despite the three-day rally, the ability of the greenback to keep rising is very questionable. The major supporting factor for the currency has been the outlook for an early interest rate hike, and now the September hike is almost out of question. At the same time, the Fed should tighten its policy eventually, and this is supportive for the dollar in the longer term.

EUR/USD traded at about 1.1245 as of 00:38 GMT today after falling from 1.1312 to 1.1242 yesterday. GBP/USD was at 1.5414 following the drop from 1.5454 to 1.5401. USD/JPY traded near 121.02 after rising from 119.91 to 121.01 during the previous trading session.

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