Investing.com -- EUR/USD closed above 1.14 for the first time since mid-October, as the dollar remained near five-month lows on Friday, after the Federal Reserve Bank of Atlanta said on Friday that U.S. GDP hardly grew during the first quarter.
The currency pair traded between 1.1338 and 1.1454, before closing at 1.1402, up 0.22% on the session. The euro ended the week slightly higher against the dollar, closing above 1.13 for the eighth consecutive session. Since the Fed elected to lower its long-term interest rate forecast on March 16, the euro has soared by more than 2.6% against its American counterpart.
EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15.
On Friday morning, the Atlanta Fed said its GDPNow forecast model lowered estimates of first quarter growth to 0.1%, from previous forecasts of 0.4% earlier this week. The revisions were made following a report released by the U.S. Census Bureau earlier on Friday, which detailed sharp declines in wholesale trade inventories in February. For the month, wholesale sales dropped for the fourth straight period, while auto inventories plunged by 1.0%, suffering its largest decline since September, 2013. As a result, the forecast for the contribution of inventory investment to first-quarter real GDP growth fell from Minus–0.4 percentage points to Minus–0.7 percentage points, the Atlanta Fed said in a statement.
Federal Reserve chair Janet Yellen, meanwhile, attempted to reassure investors on Thursday evening that the U.S. economy remains on solid footing even as she has expressed hesitancy to raise interest rates due to increased global financial risks. Yellen made the comments at a panel discussion at the International House of New York alongside former Fed chairmen Ben Bernanke and Paul Volcker.
"This is an economy on a solid course, not a bubble economy," Yellen said. "It has made tremendous progress from the damage of the financial crisis."
The Federal Open Market Committee (FOMC) has held its benchmark Federal Funds Rate steady at a targeted range between 0.25 and 0.50% in each of its first two meetings this year. In December, the FOMC abandoned a seven-year zero interest rate policy by approving its first interest rate hike in nearly a decade. At the same time, the European Central Bank enacted further easing measures last month by pushing its deposit rate deeper into negative territory.
"There is accommodation in the monetary policy that we have. But we think the gradual path of rate increases will be appropriate," Yellen added. "We remain on a reasonable path and I don't think December was a mistake."
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.30% to an intraday low of 94.09, before rallying slightly to 94.22 at the close. The index remains near five-month lows from Thursday's session.
Any rate hikes by the Fed this year are viewed as bullish for the dollar, as foreign investors pile into the greenback in an effort to capitalize on higher yields.
Elsewhere, USD/JPY stabilized above 108 one day after tumbling more than 1.5% to its lowest level in 17 months. It came as Japan finance minister Taro Aso attempted to reassure investors that the Bank of Japan will take the necessary steps to prevent sharp one-way moves in the yen.
Yields on the U.S. 10-Year gained nearly three basis points to 1.71%. Earlier this week, yields on U.S. 10-year Treasuries fell to a fresh 5-week low at 1.685%.