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Forex - Dollar modestly lower on U.S. GDP, debt fears

Published 11/22/2011, 11:03 AM
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Investing.com - The U.S. dollar remained modestly lower against its major counterparts on Tuesday, after a downward revision to U.S. third quarter growth and as concerns over debt levels in the U.S. and Europe continued to weight on market sentiment.

During U.S. morning trade, the dollar was slightly lower against the euro, with EUR/USD inching up 0.04% to hit 1.3493.

The Commerce Department’s second estimate of third quarter gross domestic product showed that the U.S. economy grew at an annualized rate of 2%, down from a previous estimate of 2.5%.

Economists had expected the rate of growth to remain unchanged in the third quarter.

Earlier Tuesday Spain’s Treasury sold EUR2.98 billion in three and six-month bonds in an auction which saw yields rise to 5.2% for the six-month bills, from 3.3% at a similar auction in October.

It was the first Spanish debt auction since the conservative party's sweeping election victory on Sunday, but investors have remained jittery as plans on how to cut the deficit and restore market confidence have remained unclear.

The greenback also dipped slightly against the pound, with GBP/USD easing up 0.04% to hit 1.5648.

In the U.K., official data showed that public sector net borrowing fell more-than-expected in October, declining to GBP3.4 billion from GBP10.2 billion the previous month as growth in tax revenue outpaced spending.

Meanwhile, the greenback was lower against the Swiss franc but higher against the yen, with USD/CHF shedding 0.26% to hit 0.9148 and USD/JPY adding 0.26% to hit 77.08.

The dollar jumped to a one-week high against the yen before falling back earlier, after remarks by Japan’s Finance Minister Jun Azumi were interpreted by some traders as hinting at more intervention to weaken the yen.

In Switzerland, a government report showed that the trade surplus widened more-than-expected in October, but the strong franc continued to put pressure on export growth.

Elsewhere, the greenback weakened against its Canadian counterpart but turned higher against its Australian and New Zealand cousins, with USD/CAD shedding 0.24% to hit 1.0375, AUD/USD sliding 0.17% to hit 0.9825 and NZD/USD down 0.23% to hit 0.7451.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, edged up 0.04% to hit 78.48.

Market sentiment strengthened earlier after ratings agencies indicated that the failure of a U.S. congressional committee to agree on a package of measures to slash the country’s deficit was unlikely to result in immediate downgrades on the U.S. credit rating.

Later Tuesday, the Federal Reserve was to publish the minutes of its November policy meeting.

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