FOREX-Euro advances as U.S. GDP data boosts risk appetite

Thu Dec 20, 2012 9:45am EST

Related Topics

* U.S. GDP rises more than forecast in 3rd quarter
    * Yen regains ground versus dollar
    * BoJ boosts asset buying by 10 trillion yen

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Dec 20 (Reuters) - The euro gained against the
dollar on Thursday in thin trading as higher-than-expected U.S.
economic growth data for the third quarter bolstered the
market's appetite for risk-taking.
    The yen, meanwhile, slipped against the dollar after the
scale of asset purchases set by the Bank of Japan disappointed
some investors who had positioned for more aggressive easing.
    But it was the U.S. gross domestic product report which took
center stage in the currency market. Investors bought more euros
as recovery in the world's largest economy seemed to be on
track. Currencies linked to global growth such as the euro and
Australian dollar tend to benefit when there's increased risk
appetite.
    The final estimate for U.S. gross domestic growth in the
third quarter was 3.1 percent, up from the 2.7 percent annual
rate reported last month. 
    "The U.S. GDP data definitely gave a modest boost to
risk-taking even though it's a final number," said Brian Kim,
currency strategist at Royal Bank of Scotland in Stamford,
Connecticut.
    But he cautioned against too much optimism because of the
ongoing U.S. budget negotiations. If a deal is not reached among
U.S. legislators, the combination of tax hikes and spending cuts
due to kick in early next year could tip the world's largest
economy back into recession.
    Investors also shrugged off data showing U.S. initial
jobless claims rose in the latest week. Claims rose to 361,000,
higher than the market's forecast of 357,000. 
    The euro rose as high as $1.3295 after the U.S. GDP
data. It was last at $1.3276, up 0.4 percent. Against the yen,
the euro was up 0.2 percent at 111.87 yen.
    The dollar, however, slipped against the yen to 84.29 yen
, but gains in the Japanese currency are expected to be
capped by the prospect of further easing by the BoJ next year.
    The Japanese central bank increased its asset buying by 10
trillion yen and said it would debate next month whether there
is room to raise its inflation target, a move that could weaken
the currency.
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