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The dollar dropped against the yen as the economy grew less than forecast and jobless-benefit claims unexpectedly rose, adding to speculation the U.S. will lag behind other nations in raising interest rates.
“Both the GDP and the claims were worse overall,” said Jens Nordvig at Nomura Holdings Inc.. “This is something that suggests that rates in the U.S. are going to stay quite low for the time being. Dollar-yen is always the most sensitive to U.S. rates.”
U.S. gross domestic product grew at a 1.8% annual rate in the first quarter, the same as estimated last month, Commerce Department figures showed today. That compares with a 3.1% gain in the prior quarter. The median forecast of economists called for a 2.2% increase. Consumer spending rose 2.2%, down from a 2.7% initial estimate.
Initial claims for unemployment benefits rose by 10,000 to 424,000 in the week ended May 21, Labor Department figures showed today. The median estimate of economists called for a drop to 404,000.
The euro fell to a record low against the Swiss franc after Luxembourg’s Jean-Claude Juncker, who heads euro-area finance ministers, said the International Monetary Fund may not release its share of aid to Greece next month.
The IMF said in a report today that Switzerland’s central bank should start raising borrowing costs to fight emerging price pressures as the economy strengthens.
The euro earlier rose versus the dollar after European Central Bank President Jean-Claude Trichet said policy makers are “carefully” monitoring inflation, fueling bets the region’s economy is strong enough for higher borrowing costs.
The ECB raised its main refinancing rate to 1.25% last month after keeping it at a record low of 1% for almost two years. The Fed has held its target rate at zero to 0.25% since December 2008. It’s forecast to keep the benchmark unchanged until the first quarter of 2012.
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