Dollar sinks to 8-month low vs yen as US economic growth slows, Fed official worried

Dollar sinks to 8-month low vs yen as growth slows

NEW YORK — Weakening U.S. economic growth and worried comments from Federal Reserve officials drove the dollar to an 8-month low Friday against the Japanese yen.

The dollar dropped to 86.34 yen in late New York trading from 86.98 yen late Thursday, sinking as low as 85.93 yen just after the government said growth in the U.S. gross domestic product fell to its weakest pace in nearly a year.

That’s the yen’s highest level against the dollar since November 2009.

The dollar was mixed in trading against other major currencies after the government said economic growth slowed during the spring.

The euro fell to $1.3053 from $1.3079, while the British pound rose to $1.5699 from $1.5620. The dollar slipped to 1.0401 Swiss francs from 1.0425 francs and fell to 1.0295 Canadian dollars from 1.0359 Canadian dollars.

The dollar had often been used as a safe haven throughout the recession and earlier this year as a debt crisis struck Europe. But worsening economic data in the U.S. is driving investors to zero in on weakening growth at home as unemployment remains high, catapulting the yen to the safe haven asset of choice among currencies.

The Commerce Department said Friday that gross domestic product, the broadest measure of the economy, grew at an annual pace of 2.4 percent from April to June. That’s less than the 2.5 percent economists polled by Thomson Reuters had forecast.

Investors found some good news in consumers’ savings rate, as extra savings will eventually be spent and give the economy a lift.

Credit Suisse analysts see the Federal Reserve keeping U.S. interest rates at record lows near zero through 2011 as the recovery falters. Low interest rates drag on the value of investments bought in dollars, sapping demand for the U.S. currency.

The appetite for dollars was also weak because of statements from a Fed official Thursday that hinted at worry within the central bank about deflation, said Joseph Trevisani, chief market analyst of FXSolutions.

James Bullard, president of the Federal Reserve Bank of St. Louis, on Thursday proposed that the Federal Reserve restart its program of buying government debt if U.S. prices, home values and wages start to drop.

The Fed bought government debt during the financial crisis to get more money circulating in the economy as credit froze.