* Dollar at session lows versus euro and yen on Q1 GDP
* Euro zone inflation up in April, but less than forecast
* Little impact on dollar from Fed holding rates steady,
* Yuan weakens, dealers eye implications for euro
(Updates with U.S. Federal Reserve decision)
By Daniel Bases
NEW YORK, April 30 A surprisingly weak
first-quarter read on the U.S. economy sent the dollar careening
lower on Wednesday against the euro and the yen.
Those losses persisted after an expected decision by the
U.S. Federal Reserve to maintain its 0-0.25 percent
interest-rate policy. The Fed stayed on course with further cuts
to its bond buying program, aimed at bolstering economic
activity, to $45 billion a month.
The U.S. economy picked up recently after adverse weather
played a role in slowing it down, the Fed said.
"On the one hand they were upbeat about the prospects for
the economy but that inflation remains a concern. All in all the
Fed remains on a steady path to wind down bond buying, but
questions still remain on when the economy might be healthy
enough endure a rate hike," said Joe Manimbo, senior market
analyst at Western Union Business Solutions in Washington, DC.
An earlier report showed euro zone inflation increased
albeit at a lower than expected pace. Inflation running below
target gives the European Central Bank room to print money, but
the data dampened slightly the expectation of the presses will
A stronger-than-expected ADP private sector U.S. employment
report pushed the greenback higher, only to see it undermined by
the paltry 0.1 percent growth rate in first-quarter U.S. gross
domestic product. Economists had forecast a 1.2 percent GDP
U.S. Midwest business activity in April rose more than
expected but barely registered in the markets.
The euro was off an earlier three-week low to trade
up 0.41 percent to $1.3868, near the session high $1.3876.
Investors sold the dollar to 102.19 yen, a loss of 0.41
The debate over the scale of disinflation in Europe has
dominated markets this week, and lower-than-expected April price
growth in the euro zone of 0.7 percent initially sent the euro
to a three-week low against the greenback.
The Chinese yuan dropped to an 18-month low against the
greenback, finishing at 6.2593 per dollar, down 0.02 percent
. The currency lost 0.7 percent in April, and has
depreciated 3.3 percent against the dollar so far this year. In
2013, the yuan strengthened 2.9 percent.
Dealers say the weakening yuan has led to the People's Bank
of China recycling some of the dollars it buys in the process
into euros to rebalance its reserves.
"Every trader I know in London seems to be calling for a
weaker euro. You can't find anyone who wants it higher, yet it
does not want to fall," said a dealer with one London bank.
(Additional reporting by Patrick Graham in London; Editing by
James Dalgleish and Nick Zieminski)