Dollar slips as investors shrug off downward revision in US economic growth

Dollar slips as investors shrug off US report

NEW YORK — The dollar slipped Friday as traders shrugged off a downward revision in U.S. economic growth in the first quarter.

With relatively sparse negative news out of Europe this week, there has been little demand to hold on to dollars. Analysts say that could change next week if any bad surprises emerge in a raft of key economic reports due out, including the closely-watched monthly report on employment.

In late trading in New York, the euro rose to $1.2387 from $1.2332 late Thursday. The dollar remains 16 percent higher against the euro in 2010.

The British pound rose to $1.5038 from $1.4937, still benefiting from optimism that a tough new budget plan will help get Britain’s public debt under control.

The dollar dropped to 89.40 Japanese yen from 89.60 yen, fell to 1.0939 Swiss francs from 1.1029 francs, and slid to 1.0359 Canadian dollars from 1.0424 Canadian dollars. The dollar also declined against the Scandinavian currencies.

While the U.S. government said that the economy had grown more slowly than previously thought, the data was not “dramatically” worse than expected, said Joseph Trevisani, chief market analyst at FXSolutions. The revision to 2.7 percent growth in the first three months of the year, down from a prior estimate of 3 percent, wasn’t enough to trigger a strong demand for safety, he said.

Economic reports due out next week, including employment data for June, may drive a rebound in the dollar, said Michael Woolfolk of Bank of New York Mellon.

The dollar also hit a low Friday against China’s currency, the yuan, as world leaders gathered in Toronto to discuss reforms of the banking sector, debt levels and deficit spending of member countries and other issues.

Amid pressure from the U.S., China pledged last weekend to allow more flexibility in the yuan’s value, which it had held at 6.83 to the dollar since July 2008. American manufacturers claimed this exchange rate significantly undervalued the Chinese currency, giving China an unfair trade advantage with cheaper exports.

But other contentious problems remain to be discussed this weekend at an economic summit in Toronto, and there is little transparency on how fast China will let the yuan rise versus the dollar.

European countries want to cut worldwide government spending, while the U.S. is pushing to spend more to revive economic growth. There are also differences of opinion on regulation of the banking sector. The U.S. announced its financial reform deal on Friday.

Uncertainty over how these differences will be resolved have helped support demand for the dollar as well, said Michael Hewson of CMC Markets.