U.S. dollar rises broadly after strong data

By Vivianne Rodrigues

NEW YORK (Reuters) - The dollar rose to a seven-week high against the euro on Friday, as strong U.S. jobs and manufacturing data damped expectations of a Federal Reserve interest rate cut this year.

Recent economic indicators have suggested U.S. growth in the second quarter may outpace the previous period, triggering a rebound in the dollar from a record low against the euro in April and a 26-year trough against the pound.

"Despite the weak GDP data in the first quarter, the latest reports have been better than expected, boosting growth expectations and the dollar," said Gregory Salvaggio, a vice president for trading at Tempus Consulting in Washington. "On top of that, there's been signs of a pickup in inflation and we all know that inflation is the Fed's main concern. That means no rate cuts in the near future."

The euro EUR= fell as low as $1.3393, the lowest since April 10, before trading back up to $1.3441, still down about 0.1 percent. The dollar rose 0.2 percent against the yen to 122 JPY=, within striking distance of 4-1/2-year highs around 122.20.

Against the Swiss franc, the dollar rose 0.4 percent to 1.2298 francs CHF=.

Against the Canadian dollar, however, the greenback fell nearly 1.0 percent to a 29-1/2-year low near C$1.0600 CAD=. A U.S. trader said momentum-oriented traders have been buying the Canadian dollar.

Data showing gains of 157,000 U.S. non-farm jobs in May kicked off a round of dollar buying earlier in the session, offsetting a fairly tepid U.S. core inflation number for April.

The dollar extended its gains after the release of the Institute for Supply Management survey, which showed its index of U.S. factory activity edging up to 55.0 from 54.7 in April. May's index was the highest since April 2006 and signaled above-trend growth for the U.S. economy.

After the ISM report, implied prospects for a rate cut this year EDZ7 fell to about 18 percent from 32 percent earlier on Thursday, as reflected by eurodollar futures contracts.

"They are all solid numbers. Put it all together and it is just positive for the U.S. economic outlook and ... on the whole, (the) numbers are dollar-positive," said Ron Simpson, director of currency research at Action Economics in Tampa, Florida.

Friday's data followed a weaker-than-expected revision to first-quarter U.S. GDP on Thursday. The U.S. economy grew at a 0.6 percent rate in the first three months of the year, the slowest pace in more than four years, according to government figures.

Next week's U.S. economic data -- led by the April international trade balance report and ISM's U.S. services survey -- are expected to offer little market impetus, traders say, and they expect currencies to trade within narrow ranges.

(Additional reporting by Gertrude Chavez-Dreyfuss and Nick Olivari)