U.S. Dollar Near One Week High after GDP

The dollar held near one-week highs against a basket of major currencies on Friday as investors interpreted latest U.S. GDP readings as keeping the Federal Reserve on track for its first interest rate hike since 2006.  The dollar index rose to as high as 97.773 .DXY =USD on Thursday, having risen 1.5 percent from its low on Monday and last stood at 97.455.

U.S. gross domestic product growth in the second quarter was 2.3 percent, lower than the consensus 2.6 percent forecast.  But growth did accelerate from the first quarter, which was also revised up to 0.6 percent from an initial reading of a 0.2 percent contraction.  The report also showed a pick-up in inflation and strong consumption during the second quarter.

“The U.S. GDP was mixed but on the whole it underpins the case for a rate hike. The market will continue to search for more hints on whether it will come in September or later,” said Shin Kadota, chief FX strategist at Barclays in Tokyo.  The data followed the Federal Reserve’s cautious but upbeat assessment on the economy on Wednesday, which some traders saw as bullish for the greenback.