CORRECTED-FOREX-Dollar shrugs off downbeat U.S. GDP data and trims losses

Thu May 29, 2014 5:33pm EDT

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(Corrects analyst's bank affiliation in paragraph 3)

* Traders look beyond worse-than-forecast GDP data

* U.S. unemployment claims ease

* Aussie jumps on brighter business-spending outlook

By Michael Connor

NEW YORK, May 29 (Reuters) - The dollar trimmed early losses against other major currencies on Thursday despite a government report showing America's economy shrank at a worse-than-forecast 1 percent annual rate during the first quarter.

Though the U.S. Commerce Department reported the first quarterly contraction in the U.S. economy in three years, foreign exchange traders focused on signs U.S. economic activity has shrugged off the chilling effects of North America's harsh winter.

"Once you get beyond the headline number, and look under the hood, things don't really look so bad," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. "Inventories were to blame for a lot of it and that bodes well for the future."

The dollar, which had given back many of its gains on Wednesday against the euro and the British pound, reclaimed some of the day's losses after the GDP report.

The euro, which touched a three-month low under $1.36 this week as expectations solidified for a multi-pronged attack on monetary policy by the European Central Bank next week, stood at $1.3607 in New York trading for a gain against the dollar of 0.13 percent. Just before the GDP report, the euro was up 0.2 percent.

The U.S. dollar index, composed of six currency pairs, was off 0.08 percent in late morning after being down 0.17 percent ahead of the GDP report, which was issued simultaneously with Labor Department data showing fewer claims for unemployment benefits.

"The forward-looking view of the world's biggest economy looks much rosier, particularly after solid U.S. data this week on durable goods and consumer confidence," said senior analyst Joe Manimbo at Western Union Business Solutions in Washington. "Better data of late suggest the U.S. economy has since rediscovered the gas pedal with expectations of near or above 3 percent growth for the second quarter."

In other foreign exchange trading, the Australian dollar jumped more than half a percent on data showing business investment spending plans for 2014/15 have jumped to A$137 billion from an earlier estimate of A$125 billion.

"The interesting thing about the Australian economy is that it is showing some signs of divergence away from China," said Christian Lawrence, a currency strategist at Rabobank in London.

"There is an increasing feeling that Australia can weather the slowdown in China better than people previously thought."

The Aussie, which is up 4.15 percent year to date, touched a high on Thursday of $0.9312 and was last at $0.9283, up 0.52 percent for the day.

(Editing by W Simon)

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